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Providing flexible SI solutions – two client cases

Providing flexible SI solutions – two client cases

03-12-2018 | Insight

Sustainability investing means different things to different people, and a one-size-fits-all approach does not work for everyone.

  • Masja Zandbergen - Albers
    Masja
    Zandbergen - Albers
    Head of ESG integration
  • Guido Moret
    Guido
    Moret
    Active Ownership Specialist

Speed read

  • Sustainability is not a one-size-fits all approach for investors
  • French pension fund FRR wanted a highly sustainable portfolio
  • Belgian bank BNP Paribas Fortis built EUR 10 bln in SI assets

That is why Robeco adopts a flexible, modular approach that enables us to develop highly customized sustainability solutions to meet any institutional client’s requirements. The following two client cases show how it can be done.

FFR – halving carbon footprints

In 2015, the French pension fund Fonds de Reserve pour les Retraites (FRR) wanted to ensure that its passive portfolio met the highest sustainability standards. In particular, it was keen to reduce its carbon footprint by 50%, and to enhance the ESG profile of its investments, with a particular focus on environmental issues.

We realized that many of the elements the FRR sought were already building blocks within our existing Robeco QI Global Sustainable Equities strategy, which integrates our sister company RobecoSAM’s Smart ESG scores into its investment model. But how could we incorporate FRR’s environmental demands within the solution we developed, while also maximizing returns?

We were able to do so by using RobecoSAM’s Environmental Impact Monitoring tool, which assesses the environmental footprint of portfolios based on four important criteria: greenhouse gas emissions, energy consumption, water consumption and waste generation. The solution we developed systematically incorporates the Environmental Dimension Score that this tool calculates. This is a forward-looking measure that complements a company’s current environmental rating by enabling us to gauge how ready the company is to deal with future environmental challenges and opportunities.

Corporate Sustainability Assessment

We also made extensive use of the huge database that RobecoSAM has amassed through its annual Corporate Sustainability Assessment to ensure that the portfolio maintains the highest ESG standards. This all meant that the FRR’s portfolio avoided the worst environmental offenders, applied a 50% carbon-reduction restriction to the portfolio construction algorithm, and only invested in companies that are best equipped to manage future environmental challenges.

But the solution we developed was not all about sustainability. Meeting fiduciary duties to investors is any pension fund’s prime responsibility, and it became apparent that the FRR was willing to consider solutions that were not purely passive to boost its return. This enabled us to suggest an enhanced indexing strategy designed not only to capture the market return with a strong sustainability profile, but also exploit well-rewarded factor premiums.

SI from scratch – BNP Paribas Fortis

The second case involved the Belgian bank BNP Paribas Fortis. In 2011, the bank was emerging from the financial crisis, and was looking for a new way to create a competitive edge. It decided to do so by embracing sustainability investing, appointing Robeco as its strategic partner to achieve this.

From having next-to-no assets in sustainable strategies back in 2012, in just six years BNP Paribas Fortis has built up its assets under management in sustainable strategies to around EUR 10 billion in 2017, and is now seen as a sustainability leader in the Belgian market. 

The bank has been able to achieve this due to a number of reasons. First and foremost, there is a strong commitment to sustainability throughout its entire network, from the very top of the company to the bottom. The firm has backed sustainability to such an extent that its bankers have been proactively offering sustainable solutions rather than traditional ones. This has been instrumental to the impressive growth in the firm’s SI assets under management.

Sustainability as the default

It means that the bank has made sustainable solutions the default option for its investors: BNP Paribas Fortis’ clients have to deliberately opt out if they do not want to invest in a sustainable product. The company has been positioning investing in sustainable products as a ‘must-have’ for its clients in terms of the benefits they provide.

Robeco has supported BNP Paribas Fortis from the beginning, resulting in a close relationship between our two companies. The bank uses strategies from across Robeco within its funds of funds. As well as allocating to the specialist sustainability-driven solutions primarily offered by RobecoSAM, it also invests in the ESG-integrated products that Robeco runs.

For example, it invests in some of RobecoSAM’s thematic strategies for its funds of funds but also allocates to several core sustainable products both on the equity and fixed income side. For the bank, a credible ESG angle is a prerequisite for a potential investment, and we are delighted to have supported BNP Paribas Fortis every step of the way on its sustainability

This is an abridged version of a chapter in the Big Book of SI.

Click here to order the full book.

Disclaimer

BY CLICKING ON “I AGREE”, I DECLARE I AM A WHOLESALE CLIENT AS DEFINED IN THE CORPORATIONS ACT 2001.

What is a Wholesale Client?
A person or entity is a “wholesale client” if they satisfy the requirements of section 761G of the Corporations Act.
This commonly includes a person or entity:

  • who holds an Australian Financial Services License
  • who has or controls at least $10 million (and may include funds held by an associate or under a trust that the person manages)
  • that is a body regulated by APRA other than a trustee of:
    (i) a superannuation fund;
    (ii) an approved deposit fund;
    (iii) a pooled superannuation trust; or
    (iv) a public sector superannuation scheme.
    within the meaning of the Superannuation Industry (Supervision) Act 1993
  • that is a body registered under the Financial Corporations Act 1974.
  • that is a trustee of:
    (i) a superannuation fund; or
    (ii) an approved deposit fund; or
    (iii) a pooled superannuation trust; or
    (iv) a public sector superannuation scheme
    within the meaning of the Superannuation Industry (Supervision) Act 1993 and the fund, trust or scheme has net assets of at least $10 million.
  • that is a listed entity or a related body corporate of a listed entity
  • that is an exempt public authority
  • that is a body corporate, or an unincorporated body, that:
    (i) carries on a business of investment in financial products, interests in land or other investments; and
    (ii) for those purposes, invests funds received (directly or indirectly) following an offer or invitation to the public, within the meaning of section 82 of the Corporations Act 2001, the terms of which provided for the funds subscribed to be invested for those purposes.
  • that is a foreign entity which, if established or incorporated in Australia, would be covered by one of the preceding paragraphs.
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