Victor Verberk

Robeco has launched its Sustainable Investing Open Access Initiative. This means that Robeco is opening up its Sustainable Investing Intellectual Property. As a first step of this Open Access initiative, clients and a group of academics will gain free access via a portal to the Sustainable Development Goal (SDG) scores of companies Robeco has generated using its proprietary SDG framework.

Robeco started developing its SDG Framework in 2017. The framework allows Robeco to quantify an investible company’s contribution to the SDGs. Data quality is one of the biggest challenges in sustainable investing. Robeco is convinced that the industry should work together to improve data and define standards. With the SI Open Access Initiative, Robeco aims to make a significant contribution to this.

Robeco’s commitment to a more sustainable world also means opening up its intellectual property to a broader audience to help clients make better informed sustainable decisions. Robeco actively seeks for feedback on the data, and is in an ongoing dialogue with its stakeholders, including academics, clients and SI experts. As a result, Robeco expects that this initiative will further enhance the robustness of the data and our methodology. All of this with the aim to contribute and be part of the move towards a more sustainable world. At a later stage, Robeco will also make other SI data and IP available to a broader set of stakeholders.

The SDG framework is used for many of Robeco’s client portfolios. These include some of the world’s biggest asset owners like UBS Global Wealth Management, BBVA AM and pensioenfonds ING, who are all keen supporters of Robeco’s SI Open Access initiative.

Victor Verberk, CIO Fixed Income and Sustainability: “This initiative is right in line with our firm belief in a data and research-driven approach. We were among the first asset managers to construct an effective framework for mapping and measuring SDG contributions that can be applied across investment portfolios. Traditionally asset managers tend to protect intellectual property and use it to add value to their proprietary investment processes. Yet the massive challenges our planet is facing require a different approach. We need to join forces to address these challenges properly. By opening up our SDG data to a broader audience we aim to contribute to improving quality and standards setting across the industry.”

Carola van Lamoen, Head of Sustainable Investing: “We consider this is a landmark move which will bring the sustainable investing industry a step further. Granting clients and academics access to our SDG data and methodology is only the first step. With SDG data clients can measure progress over time against sustainable objectives, steer on exposure to SDGs, and report on them. Robeco is a research-driven investor. We base our investment decisions on empirical research and believe that this also applies to sustainable investing. Furthermore, by publishing our SDG scores we aim to enable academics to develop new insights. We therefore invite them to actively share their feedback on our SDG data and methodology.”

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Despite the challenges that inherently come with collaborations, the future of sustainable investing will be collaborative.

Solving the world’s greatest sustainability challenges, from halting climate change and biodiversity loss to promoting well-being and inclusion, requires collaboration. These issues are so complex that nobody – not governments, NGOs or big business – can solve them by themselves. That is why we do not act in isolation. So, why do we find partnerships so important, who do we collaborate with, and what do we work on?

There are two key reasons why collaboration is important for us. First of all, when working together, you can send a strong message to companies. Having a conversation as a single investor can be impactful, but when you speak on behalf of 10, 20 or more investors with related assets, it becomes even more powerful.

Next to this, there are so many sustainability areas that deserve attention. We invest in thousands of companies and we cannot engage with all of them, even with our team of 17 active ownership specialists. So, we have to prioritise.

Covering more ground

By partnering with others, we can work on more topics.

And from a global perspective, it makes a lot of sense to collaborate: partnerships help us to cover more ground.  So, all in all, collaboration enables us to have more clout.

Who do we collaborate with? We believe that effective action on sustainability issues requires partnerships with a diverse group of stakeholders. For that reason, we have different kinds of collaborations with other professional investors, while collaboration with NGOs and academics are of growing importance for us.

Collaborating on climate

Our collaboration with Climate Action 100+ is a good example of how this works in practice. In this partnership, we engage with the world’s largest carbon emitters in order to reduce their adverse impacts on climate change. One sole investor may not make a difference, but a group of 617 investors with a combined USD 65 trillion in assets cannot be ignored.

There are many more such partnerships making a real difference. For example, we collaborate on living wages through the Platform Living Wage Financials, and on governance via the Asian Corporate Governance Association, and also through local governance initiatives such as AMEC in Brazil and Eumedion. Some of our collaborations have proven to be extremely powerful: strength in numbers can accelerate a transition to a more sustainable future.

We work carefully to maximise the efficiency of the partnerships we are involved in – but there are drawbacks. Joining forces can sometimes also be a burden. Not every investor is as involved as we would like. There are sometimes classic free rider problems, when not everyone is contributing their fair share. Another key aspect to collaborating successfully is clarity on the direction of travel. If investors do not agree on the course of action towards a company, such a collaboration is likely to become bogged down with vague positioning that will lead nowhere.

Taking an active role

With every collaboration that we join, we therefore assess the likely contribution we can make, and what we want to achieve. In the 15 years that I have been involved in active ownership, I have seen all different shades of collaboration. Some of these were an outright success, but there were also clear failures.

Overall, the asset management industry is rapidly professionalising, including the adoption of stronger process support for collaborative initiatives. That helps. At the same time, there is a massive growth in the number of investors that have entered the engagement arena, though not everyone has built a high-quality engagement capability overnight. This in itself can be challenging.

And we not only work with our peers; we also collaborate with NGOs to tap into their deep knowledge and experience of tackling sustainability issues. For example, we recently announced our partnership with the World Wide Fund for Nature Netherlands (WWF-NL). Their in-depth knowledge and research-driven approach are phenomenal, so this is helping us to develop a biodiversity investment framework. This collaboration will help us among other things to assess the impact that the companies in which we invest have on global biodiversity loss. This partnership is important as biodiversity is one of the three strategic topics in our current sustainable investing strategy.

Working with academia

Finally, collaborating with academics is key if you want to have a strong scientific base for your sustainable investing approach and expand your sustainability knowledge. For instance, we recently created a Sustainable Development Goals (SDG) Advisory Board in which three renowned academics – Prof. Kees Koedijk at Utrecht University; Cary Krosinsky at the Universities of Yale and Brown; and Prof. Rob van Tulder at Erasmus University – advise us on our SDG Framework and related strategies.

Our collaboration and active contribution to the investor leader group of the Cambridge Institute for Sustainable Leadership (CISL) is another excellent example of how beneficial this can be. CISL’s research has deepened our knowledge on nature-related financial risks and helped in areas that previously had only been researched to a limited extent. For example, we gained further insights on temperature scores, and what are the key approaches to biodiversity. The investment industry needs science to progress and fine tune their approach. Working with academics helps us attain that ambition.

Dilemmas but new dimensions

So to summarise: there are clear dilemmas in collaborating. Jointly you can achieve more, and your clout is bigger. But not everyone is progressing at the same speed, and there can be free rider problems.

Still, working with NGOs and academics has brought new dimensions beyond traditional investor collaborations. Such partnerships not only give us an abundance of new energy, but also help us to broaden our sustainability knowledge. Despite the challenges that inherently come with collaborations, I am convinced that the future of sustainable investing will be collaborative.

By Carola van Lamoen, Head of sustainable investing

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Victor Verberk

The Robeco SDG Credit Income Fund (AUD Hedged) (“Fund”) has received a recommended rating from independent research house, Lonsec.

Robeco launched the Fund – which aims to contribute to realising the 17 UN Sustainable Development Goals (“SDG”) – for Australian investors in November 2020. It feeds into the Luxembourg-domiciled strategy launched in May 2018, and has since attracted USD 1.2 billion in assets under management globally as of 31 March 2021.

The strategy is managed by Robeco’s global credits team including the CIO of fixed income and sustainability, Victor Verberk, and portfolio managers Reinout Schapers and Evert Giesen are jointly responsible for the management of the Fund.

The sustainable investing team, led by Carola van Lamoen, is responsible for the framework, data and assessment of names relative to the SDG’s.

In assessing the Fund, the report said: “Robeco has a strong pedigree in sustainable investing and the SDG/impact framework is seen as robust and well-developed with specialist resourcing.

“Overall ESG integration across the investment process for the Fund was strong and demonstrated a leading position relative to peers in this sector.”

Robeco Australia head, Stephen Dennis, said: “Receiving a ‘recommended’ rating from Lonsec is a strong endorsement of the Fund and increases its appeal to financial advisers. With our expertise in sustainable investing and credits, Robeco is well placed to meet the demand in the market for quality sustainable credit funds.”

The Robeco SDG Credit Income Fund (AUD Hedged) is an actively managed global credit strategy that invests in opportunities across different segments of the credit market, ranging from investment grade to emerging markets credits, to high yield.

It aims to provide a monthly income distribution and achieve an attractive yield currently about four per cent per annum, while managing downside risk and mapping the impact of the portfolio’s contributions to the SDG’s.

The recommended rating from Lonsec for Robeco SDG Credit Income Fund (AUD Hedged) sits alongside the recommended rating from research consultancy, Zenith Investment Partners.

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Sylvia van Waveren

A partnership between companies and investors is essential if climate change targets are to be met. And investors must themselves band together through collaborative initiatives if real progress in decarbonizing the energy sector is to be made.

That’s the message from engagement specialist Sylvia van Waveren and Head of Active Ownership Carola van Lamoen ahead of the annual World Economic Forum, at which the issue of tackling emissions has top billing.

The main topic to be discussed at Davos on 21 January is “How to address the urgent climate and environmental challenges that are harming our ecology and economy.”

Becoming carbon neutral

Making the world carbon neutral by 2050 is seen as essential to meet the goals of the Paris Agreement, which seeks to limit global warming to 2 degrees Celsius or less above pre-industrial levels by the second half of this century.

Much of the focus has been on reducing the carbon emissions by oil and gas companies in the transition from fossil fuels towards renewable, net zero carbon energy.

Three-year engagement

Robeco had a three-year engagement program with eleven listed oil and gas companies that ended in 2019. Engagement was conducted with six international and five national oil and gas companies which combined account for one quarter of global oil and one fifth of gas supply.

“Looking back on three years of engagement, our work with the oil and gas companies have in general led to successful outcomes,” says Van Waveren, who covers the global energy industry in Robeco’s Active Ownership team.

“Of the 11 companies within the peer group, we have been able to close seven successfully, based on their progress on the underlying objectives set at the beginning of the engagement. That’s a success rate of 64%.”

Stunning success with Shell

The engagement formed part of collaborative work with the Climate Action 100+ initiative, a grouping of more than 370 investors with more than USD 41 trillion in assets collectively under management. Launched in December 2017, the initiative has identified more than the 100 companies that emit the most carbon, including the biggest names in the oil and gas sector.

It achieved a stunning success in December 2018 when Shell agreed to set short-term targets for the carbon emissions, including those of the used products, and said it will link executive pay to meeting these objectives for the first time. The Shell engagement was co-led by Robeco and the Church of England Pensions Board.

“The Shell example shows how important it is to form partnerships, both with the companies that need to lower their carbon footprints, and with other investors,” says Carola van Lamoen, Head of the Robeco Active Ownership team.

“Initiatives like the Climate Action 100+ have laid the foundations for the unprecedented partnerships that are needed going forward in high-emitting sectors such as aviation, automobiles, shipping, energy and steel.”

Public/private partnerships

The Davos summit is itself a public/private partnership at which the world’s largest corporations meet in the Swiss ski resort every January to discuss global issues. This year the main topics under discussion by business leaders are sustainability, the ‘fourth industrial revolution’ and the demographic and social trends reshaping entrepreneurship.

Van Waveren says investors can build on the collaborative successes of 2019, at which three major moves forward were seen. “The first and most important was the firm establishment of the umbrella-style partnership model to drive ambitious change, as seen with what Climate Action 100+ achieved working collectively,” she says.

“The second was the concept of aligning companies’ business models with the Paris Agreement, helped by organizations such as the Transition Pathway Initiative, which looks at carbon emissions. Thirdly, attention has been – very logically – shifting away from energy supply and towards energy demand, since many decarbonization solutions lie with the use of the energy products by consumers. One example is the high carbon industries such as transport.”

More ambition needed

In 2020, investors and companies can build on this success, Van Waveren says. “While 2019 marked a watershed in terms of emerging practice and in terms of changing investors’ attitudes and views, we do not yet have the level of ambition needed if we are to succeed,” she says.

“This is why 2020 has to be the time a new partnership is formed between the company board room and institutional investors. This should be a partnership that is based upon systemic change and practical outcome that can work across the full value chain and across all asset classes, to develop net-zero carbon paths for aviation, autos, shipping, steel and cement, to name but a few.”

Van Waveren says that at a governmental level, Nationally Determined Contributions – the emissions that countries are committed to mitigate under the Paris Agreement – will rise up the agenda. Many governments including Robeco’s home nation of the Netherlands are already setting targets. Some companies are also formulating their own Determined Contributions to similarly try to become Net Zero Carbon– the new buzz phrase in sustainable investing – by 2050.

By Sylvia van Waveren and Carola van Lamoen

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