Results of EU fund classification reflect sustainability of Robeco’s fund range

Results of EU fund classification reflect sustainability of Robeco’s fund range

10-03-2021 | Insight
Investment funds are getting a huge shake-up under new EU rules that will prove how sustainable they really are. And this bodes well for Robeco’s suite of strategies that have embraced sustainability for decades.
  • Elissa Lyra
    Senior Product Development Manager
  • Kenneth Robertson
    Client Portfolio Manager - Sustainable Investing

Speed read

  • Almost all Robeco funds meet the EU’s sustainability credentials
  • Articles 8 and 9 mirror an existing internal classification system
  • Long history of integrating sustainability made the process easier

The moves form part of the EU’s Sustainable Finance Action Plan and a key new directive, the Sustainable Finance Disclosure Regulation (SFDR), both of which start to come into effect from March 2021.

The SFDR forces asset managers to disclose the differing levels of sustainability integration and focus of each investment strategy that they offer. This aims to create a more transparent playing field and stop greenwashing by increasing comparability between funds for end investors.

Two defining parts of the regulation affect virtually all funds at Robeco. Article 8 labels all strategies that that promote environmental and social characteristics, and have these factors integrated into the investment process. The higher Article 9 applies to those with specific sustainability targets or objectives. All needed to be labeled according to the relevant Article by 10 March.

Climate investing: from urgency to solutions
Climate investing: from urgency to solutions
Read more

Business as usual

In a way, this is business as usual for Robeco. “With 25 years of sustainable investing experience, Robeco has long categorized our range of investment using our own internal classification system,” says Kenneth Robertson, Client Portfolio Manager with the Robeco SI Center of Expertise.

“When preparing for the new requirements specified under SFDR, we have therefore been able to draw on these experiences to ensure our compliance with the new regulations from their 10 March implementation.”

“Our company-wide philosophy is that companies (and countries) that act in a sustainable way towards the environment, society and all its stakeholders are likely to be more able to deal with a variety of issues in the future of their business or endeavours. The vast majority of Robeco strategies therefore systematically integrate ESG into the investment process based on proprietary research.”

“Here, the starting point is a deep understanding of the materiality of sustainability factors, and their impact on a company’s business model and profitability, allowing us a better understanding of the risks and opportunities faced by companies over the long term.”

In-house classifications

Robeco’s in-house classification system was launched in 2019 to make it easier for clients to choose just how sustainable they wanted their investments to be. This led to the creation of three types of fund range, labeled as Sustainability Inside, Sustainability Focused, and Impact Investing.

“The majority of Robeco strategies fall into our Sustainability Inside category, which includes full ESG integration based on proprietary research, exclusions, and voting and engagement,” says Robertson. “Our Sustainability Focused strategies have an explicit sustainability policy, and targets for an ESG profile and an environmental footprint that are better than their benchmarks.”

“Our Impact investing strategies aim to contribute to specific sustainable themes, such as the Sustainable Development Goals and our new fixed income climate funds that are aligned with the Paris Agreement benchmark. These funds are labeled as RobecoSAM.”

Mirroring the regulations

This neatly mirrors the new SFDR classifications:

  • Article 8 Funds: “Where a financial product promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices.” This will cover all Sustainability Inside and Sustainability Focused strategies.
  • Article 9 Funds: “Where a financial product has sustainable investment as its objective and an index has been designated as a reference benchmark.” This will cover all Impact Investing funds (labeled as RobecoSAM).

A small minority of Robeco funds will fall under the lesser Article 6 classification, in which ESG is not applied, such as those solely using derivatives, or cash savings accounts.

Dedicated working groups

“Even with a long history of sustainable investing, Robeco undertook an extensive classification of our strategies, using the criteria as set out by the new SFDR regulations,” says Elissa Lyra, Senior Product Development Manager at Robeco.

“Our classification process began with the creation of dedicated working groups for each investment capability offered by Robeco, including for fixed income, quant, fundamental equity and multi asset. At this stage, each fund was mapped against the classification requirements as set out by the SFDR.”

“As a second step, using a newly developed in house tooling, we assessed the performance of our fund range against the adverse impact metrics as specified under the regulation. Following these initial steps, Robeco’s Legal, Compliance and Risk teams performed additional assessments to ensure compliance with the spirit and the letter of the new regulations.”

“Finally, this led to a classification proposal that was reviewed by several internal governance committees, and ultimately led to the final classification of our fund range that comes into play on 10 March. New fund disclosures will also be available on our website from that date.”

Promoting environmental and social characteristics

While the process was complex and involved teams across the whole company, it was made easier by the fact that ESG has routinely been integrated into the investment process since 2010 .

“Given that the vast majority of Robeco strategies systematically integrate ESG into the investment process, in addition to integrated active ownership and exclusions, most Robeco strategies fell quite naturally under Article 8,” says Lyra.

“Binding selection criteria were used for the underlying assets, as well as binding indicators to measure whether the criteria for promoting environmental or social characteristics were met. The assessment of good governance practices among investee companies is also an integrated part of these strategies.”

“Our SI Focused range goes a step further in reducing their environmental footprint versus the benchmark. However, we chose to still classify these strategies as Article 8 funds, given that these strategies are not deemed to be fully pursuing environmental or social objectives, but rather strive for a footprint reduction as a risk mitigation measure.”

“For Article 9, all of our RobecoSAM-labeled strategies follow our state-of-the-art impact approach. They are designed to make a measurable environmental or societal impact, and therefore have a sustainable investment objective at their core, as well as a commitment to do no significant harm to other sustainable objectives. The whole Impact Investing range can therefore be classified as Article 9.”

Sustainable Finance Action Plan
Sustainable Finance Action Plan



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.
I Disagree