Investment business

Relevance of the topic

The investment business is part of LUKB's core business. It comprises investment advice, asset management, LUKB's own investment instruments as well as other custody account business. LUKB offers sustainable investment solutions in its asset management, advisory services and own investment funds.

Respect for the environment and society is a fundamental value for LUKB, i.e. for the parent company Luzerner Kantonalbank AG and the wholly owned subsidiary LUKB Expert Fondsleitung AG. At the same time, LUKB firmly believes that taking sustainability criteria into account is a prerequisite for successful investment decisions and helps to identify risks and opportunities at an early stage. Addressing the major challenges facing our society, in particular achieving the climate goals set out in the Paris Agreement as well as promoting more sustainable development in line with the United Nations Sustainable Development Goals (SDGs), are core priorities in this regard. An overview of the SDGs can be found in the Annex to this Sustainability Report.

Principle

In October 2019, LUKB signed up to the United Nations Principles for Responsible Investment (UN PRI)¹⁾. Having done so, it is committed to incorporating environmental, social and governance aspects into its investment decisions and thus contributing to a more sustainable global financial system.

LUKB has drawn up a mission statement for sustainability in its investment business that serves as a guideline for responsible investment. This is published in the document ‘Investieren mit Weitsicht – Leitbild der LUKB zu Nachhaltigkeit im Anlagegeschäft’¹⁾ on the LUKB website and explains the principles by which LUKB defines and implements sustainability in its investment solutions.

By joining the Partnership for Carbon Accounting Financials (PCAF)²⁾ in 2023, LUKB has also committed to measuring and disclosing indirect greenhouse gas emissions (Scope 3) in its investment and lending business.

Targets

Investment advice

In the context of investment advice, the LUKB client advisor advises the client throughout the entire investment process, from defining the investment strategy to implementation (investment proposals) as well as the monitoring of the portfolio. However, all investment decisions are always made by the investor.

Goals of LUKB:

• Recording its clients' sustainability preferences as part of its investment advisory services and offering appropriate advice
• Compliance with the ‘Guidelines for the financial service providers on the integration of ESG preferences and ESG risks and the prevention of greenwashing in investment advice and portfolio management’¹⁾ of the Swiss Bankers Association (SBA) – taking into account the applicable implementation deadlines
• Engaging in dialogue with companies about initiatives and pools on ESG topics

Asset management

In the case of asset management, the client delegates the individual investment decisions to the portfolio management specialists at LUKB once a strategy has been defined together.

Goals of LUKB:

• Sustainable management of all standard asset management mandates
• Compliance with the ‘Guidelines for the financial service providers on the integration of ESG preferences and ESG risks and the prevention of greenwashing in investment advice and portfolio management’¹⁾ of the Swiss Bankers Association (SBA) – taking into account the applicable implementation deadlines
• Engaging in dialogue with companies about initiatives and pools on ESG topics

LUKB's own investment funds

LUKB's own investment funds are investment instruments that give clients access to asset classes in line with their risk appetite. They are actively managed and are based on clearly defined investment strategies.

Goals of LUKB:

• Sustainable management of all own investment funds (LUKB Expert funds)¹⁾
• Compliance with the ‘Self-regulation on transparency and disclosure for sustainability-related collective assets’²⁾ published by the Asset Management Association Switzerland (AMAS) – taking into account the applicable implementation deadlines
• Engaging in dialogue with companies about initiatives and pools on ESG topics
• Active and responsible exercising voting rights for the majority of equity holdings

Status in 2025

Sustainability in the investment business

In 2022, LUKB systematically aligned its investment and fund business with sustainability criteria. With its investment solutions in asset advisory and asset management as well as with its own investment funds, LUKB strives to ensure compatibility with the following sustainability goals:

• LUKB invests in responsible companies, states and other issuers such as supranational organisations or public-sector entities as well as in sustainable collective investment schemes. LUKB follows a clearly defined sustainability approach when selecting securities for standard asset management mandates and in the management of LUKB Expert investment funds. The sustainability approach is also incorporated into asset advisory by taking account of clients' individual sustainability preferences and systematically monitoring their compliance.
• Through targeted stewardship activities, LUKB is committed to a more sustainable society and environment. This includes active company dialogue, including through direct participation in collective engagements, as well as the responsible exercise of voting rights with the LUKB Expert funds. LUKB engages specialist service providers for these tasks and is a member of relevant industry organisations.

Sustainability assessment by LUKB

LUKB assesses the sustainability of companies, states and other issuers on the basis of several factors:

• ESG ratings
• Business conduct (controversies)
• Exclusion criteria
• Risks and opportunities related to climate change
• Contribution to a more sustainable society (impact)

The sustainability assessment is divided into four categories: ‘outstanding’, ‘solid’, ‘adequate’ and ‘unsatisfactory’. This is based on LUKB's own quantitative model that uses data from renowned providers such as MSCI ESG and ISS Governance. ESG ratings are the starting point when assessing sustainability. The ratings are adjusted according to business conduct, climate risks and impact. Issuers that violate the exclusion criteria are rated as ‘unsatisfactory’.

Investment instruments classified as ‘unsatisfactory’ are not taken into consideration for LUKB's sustainable investment solutions. As a result, investments are excluded that exhibit inadequate ESG risk management, grossly violate international standards or whose business activities are environmentally or socially critical.

In the case of third-party sustainable funds, LUKB uses legally binding documents such as the fund prospectus to assess the credibility of the sustainability approach. The reference framework for this assessment is the AMAS ‘Self-regulation on transparency and disclosure for sustainability-related collective assets’. In the case of funds from issuers that are not subject to this self-regulation, the assessment is based on the sustainability approaches applied in order to ensure appropriate and comparable implementation.

A detailed description of the assessment models and the criteria applied, including the exclusion criteria, can be found in the brochure ‘Investieren mit Weitsicht – Nachhaltige Anlagen bei der Luzerner Kantonalbank’¹⁾ on the LUKB website.

Dialogue as a lever for sustainable transformation

In recent years, dialogue between investors and businesses on sustainability issues (engagement) has become an effective lever in transforming the economy. LUKB focuses on three main areas:

• Adherence to global standards: LUKB participates in a standards-based pool and seeks to enter into dialogue with companies in the event of human rights and labour rights violations, environmental scandals and incidents of corruption.
• Climate-friendly orientation: Within the limits of its resources, LUKB is committed to ensuring that companies become more climate-friendly.
• Preservation of biodiversity: LUKB calls on companies to improve their transparency with regard to biodiversity risks and their impact on nature as well as their strategy for managing nature-related risks.

LUKB focuses on joint engagements with other investors, known as investor-led initiatives or engagement pools. Escalations occur primarily within these activities – through repeated contact across different hierarchical levels.

If, despite intensive efforts, the dialogue is unsuccessful and expectations are not met, possible escalation steps will be examined on a case-by-case basis, including:

• Direct contact by LUKB in order to push dialogue
• Downgrading the company's LUKB sustainability assessment
• Adjusting voting behaviour at the next annual general meeting
• Selling the position as a last resort

Dialogue activities in 2025 included:

Adherence to global standards:

• Dialogue through the ISS standards-based engagement pool
• Supporting initiatives of the FAIRR¹⁾ investor network

Climate-friendly orientation:

• Participation in the ‘Climate Action 100+’²⁾ initiative
• Dialogue via the ISS ‘Net Zero’ engagement pool

Preservation and promotion of biodiversity:

• Dialogue via the ISS ‘Biodiversity’ engagement pool
• Supporting initiatives of the FAIRR investor network
• Participation in the ‘Spring’ initiative of the UN PRI³⁾

In 2025, LUKB engaged in dialogue with various companies to discuss in excess of 500 issues, be it via initiatives or as part of a pool.

• More than 70 % of the dialogues related to environmental issues, with climate change accounting for the largest share.
• Around 130 cases dealt with social aspects such as labour and human rights as well as health.
• In 13 cases, the focus was on corruption.

The following chart shows the breakdown of dialogues by area in 2025:

LUKB published its third Stewardship Report¹⁾ in 2025, which provides further details on the dialogue activities.

Responsible exercise of voting rights

Investors can drive responsible corporate governance by actively exercising their voting rights at general meetings. LUKB Expert Fondsleitung AG did just that for the majority of LUKB Expert investment fund equity positions in 2025. It was supported in this by specialist service provider ISS Governance, which provided voting recommendations and acted as proxy at annual general meetings in particular. In addition to good corporate governance, the voting rights guidelines applied by LUKB Expert Fondsleitung AG explicitly include environmental and social aspects. In this respect, it takes into account the recommendations of the ISS Climate Proxy Voting Guidelines.

In 2025, LUKB Expert Fondsleitung AG attended 269 meetings on behalf of LUKB Expert investment funds, at which around 4,900 motions were discussed. At around 67 % of the meetings, LUKB Expert Fondsleitung AG voted against the recommendation of the Board of Directors (BoD) on at least one motion. In total, approximately 11 % of votes rejected the motions of the BoD. These concerned in particular compensation issues and the election of members of the Board of Directors. The proportion of votes against shareholder motions was approximately 50 %.

LUKB published its third Stewardship Report¹⁾ in 2025, which provides further details on voting behaviour.

Transparency

Transparency is key to providing clarity on how sustainability is defined and implemented. LUKB creates this transparency through clear assessment criteria, a systematic sustainability assessment and the provision of comprehensive ESG data – also on an aggregated basis at portfolio level in client reporting.

Detailed information is available for all investment instruments. The sustainability assessments for collective investments (‘sustainable’ or ‘traditional’) and individual securities (‘outstanding’, ‘solid’, ‘adequate’, ‘unsatisfactory’ or ‘not covered’) enable clients to check whether their sustainability objectives have been met – in particular, whether there are any securities classified as ‘unsatisfactory’. Supplementary key figures on five detailed factors show how the classification is determined. In the case of collective investments, the sustainability approaches applied are also disclosed. This information is available at both the individual instrument level and the portfolio level.

Other key figures

Greenhouse gas emissions

Once again, LUKB has disclosed greenhouse gas emissions for investments in LUKB Expert investment funds and standard asset management mandates for the 2025 financial year; see the ‘Greenhouse gas emissions and climate protection’ section.

Responsible and traceable gold

The LUKB Expert investment funds include physical gold from a major Swiss bank, which offers transparency and traceability along the entire supply chain. Gold is selected based on a restrictive selection of countries and mines. The origin of the gold is confirmed by a technology-based process with DNA markers and PCR tests. This also ensures that the gold is mined and produced in accordance with internationally recognised environmental and human rights standards.

In the field of asset management, a gold fund is used that invests exclusively in certified and traceable gold bars from responsible production.

External assessment of sustainability in the investment business

In 2024, WWF Switzerland analysed the fifteen largest Swiss retail banks as regards their efforts to protect the climate and biodiversity. LUKB is one of the leaders in the area of ‘Saving, Investing & Pensions’.

LUKB also stands out by international standards: the UN PRI Assessment Report 2025 rates its performance in the ‘Policy, Governance and Strategy’ category with four out of five stars – an above-average result.