switzerlanden
‘We really have to act now’

‘We really have to act now’

18-04-2019 | Interview

Are we heading for a wall? Robeco CEO Gilbert Van Hassel talks about leadership in sustainable investing, business opportunities, the lack of regulation and clear definitions, SDGs and the challenge of staying ahead of the pack.

  • Peter van Kleef
    Peter
    van Kleef
    Chief Editor

In 2018, Robeco changed its mission statement to include ‘creating wealth and well-being’ as one of its goals. Does that resonate with clients? Or is there still a sense that sustainability and return objectives are at odds with each other?

“There’s no one response to that question. In the Netherlands, and northern Europe, we are ahead of the game. Here, it is already part of pension funds’ fiduciary duty to incorporate sustainability. So the two are perfectly compatible. But even in Scandinavia, which is actually a leader in this area, the degree to which it is integrated varies a lot. Norway and Sweden are quite far along, but people in Denmark still question whether you can reconcile the two and how pursuing well-being will impact the creation of wealth.”

“More and more academic work gives proof that there is a link between sustainability and long-term value creation. Especially on the G component of ESG this starts to be conclusive. However more academic work is needed to establish the full link between the two.”

“But in the US, most pension funds are subject to ERISA, an act drafted by the Department of Labor that states that their fiduciary responsibilities include maximizing returns on behalf of participants. As long as there is no fully proven causal relationship between sustainability and wealth creation, those funds will be unable to implement sustainability on any appreciable scale. There’s just not enough scientific evidence yet, the data series are too limited and the track record of funds is too short to give them academic weight. Until the fiduciary responsibilities are reformulated, their participation will be marginal at best. Their hands are tied.”

Investors often speak of ‘risk-adjusted returns’. Do you think ESG integration mostly tends to reduce risk, or boost returns?

“I think it’s about 50-50. If risk increases over time, then clearly returns will follow. If you take a really simplistic look at what will happen in the long term – if we don’t change the way we treat the climate, with CO2 emissions – then it’s obvious we are eventually going to hit a wall. The global economy will stop growing and start contracting, and large amounts of value will be wiped out. So basically, risk and return are two sides of the same coin for me.”

Stay informed on Sustainable Investing with monthly mail updates
Stay informed on Sustainable Investing with monthly mail updates
Subscribe

Would you say that the financial services industry is going through a period of soul-searching right now?

“Absolutely. And it’s not just a passing phase. Of course, a lot of people see this as a window of opportunity and are therefore jumping on the ESG bandwagon. But I’m convinced that sustainability will become standard before we know it. Right now, it’s fashionable, but in three or four years from now, sustainable investing will be standard practice. And it’s essential that that happens. If you read scientific reports about climate change and CO2 emissions, you realize that we really have to act now.”

“As things stand now, we’re heading straight for that wall. People are becoming more and more anxious. I think that both governments and businesses – and every one of us as individuals – must take responsibility. The long-term survival of society depends on it. And it’s going to require a huge effort from the entire planet. The question is whether we can afford to do it from an economic standpoint. Then again, can we afford not to? What would the world look like then?”

“One of the key challenges is deciding how to define sustainability. It seems like the number of things that are considered sustainable grows with each passing year. If you expand the definition to include not only the climate but also diversity, income equality and poverty, then it’s painfully clear that things have to change.”

SDGs provide a clear framework and go a step further than just the climate. Is that a big leap forwards?

“I think that the SDGs offer a really good framework, because they enable us to better define what sustainability means. But that’s not enough. The next step is being able to measure and report on sustainability. And a lot of work needs to be done before we’re in a position to do that. It’s of the utmost importance that we develop a framework for this with the help of the European regulators.”

“We embraced SDGs early on. We were one of the first to launch an SDG Equities product and after that, we were the first to develop a model that allowed us to apply it to credits, too. That’s great, but ultimately, the SDGs will only have a really significant impact once the EU develops a solid framework and we have generally accepted definitions. Only then will we be able to really measure sustainability and see the impact on the SDGs. So yes, we can play a part in this, every asset manager can make a contribution. But ultimately, there needs to be a coordinated effort, driven by EU regulations, that allows the government to draw on the expertise of industries such as ours.”

Robeco is a pioneer in sustainable investing. But as a leader, you always have the so-called ‘handicap of progress’ to contend with. Competitors do not need to reinvent the wheel. How can Robeco maintain its competitive edge?

“This is definitely something I lose sleep over, despite innovation being in the company’s blood. We invest a lot of time and energy in it. With sustainability, it all started with an enthusiastic team in Zurich that began looking at companies out of a real passion for green solutions and embracing the ideology of sustainability. Since then, we’ve come a long way together. Sustainability has become an integral part of the financial analysis. I call that ‘applied research’ because it’s used to analyze the value of assets and it plays a role in building portfolios and, ultimately, generates alpha. We are still making great strides, but we have a ways to go. And there are no limits on that, either.”

Is the process moving fast enough?

“Only time will tell. But when I see what peers are doing... Then yes, you have the handicap of progress against you, but the process of building experience and expertise can’t be rushed. It takes time, by definition. And we really do still have an edge on our peers. Our clients tell us so. It helps if you’ve been doing it for a really long time, and therefore had the opportunity to gain experience and keep getting better, and make improvements. Building up expertise takes time and many hours of practice. I think other parties can probably catch up a bit, but we will still be ahead of the pack.”

This interview was first published in Sustainability Inside

Subjects related to this article are:

Important legal information

The content displayed on this website is exclusively directed at qualified investors, as defined in the swiss collective investment schemes act of 23 june 2006 ("cisa") and its implementing ordinance, or at “independent asset managers” which meet additional requirements as set out below. Qualified investors are in particular regulated financial intermediaries such as banks, securities dealers, fund management companies and asset managers of collective investment schemes and central banks, regulated insurance companies, public entities and retirement benefits institutions with professional treasury or companies with professional treasury.

The contents, however, are not intended for non-qualified investors. By clicking "I agree" below, you confirm and acknowledge that you act in your capacity as qualified investor pursuant to CISA or as an “independent asset manager” who meets the additional requirements set out hereafter. In the event that you are an "independent asset manager" who meets all the requirements set out in Art. 3 para. 2 let. c) CISA in conjunction with Art. 3 CISO, by clicking "I Agree" below you confirm that you will use the content of this website only for those of your clients which are qualified investors pursuant to CISA.

Representative in Switzerland of the foreign funds registered with the Swiss Financial Market Supervisory Authority ("FINMA") for distribution in or from Switzerland to non-qualified investors is ACOLIN Fund Services AG, Affolternstrasse 56, 8050 Zürich, and the paying agent is UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zürich. Please consult www.finma.ch for a list of FINMA registered funds.

Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco/RobecoSAM AG product should only be made after reading the related legal documents such as management regulations, articles of association, prospectuses, key investor information documents and annual and semi-annual reports, which can be all be obtained free of charge at this website, at the registered seat of the representative in Switzerland, as well as at the Robeco/RobecoSAM AG offices in each country where Robeco has a presence. In respect of the funds distributed in Switzerland, the place of performance and jurisdiction is the registered office of the representative in Switzerland.

This website is not directed to any person in any jurisdiction where, by reason of that person's nationality, residence or otherwise, the publication or availability of this website is prohibited. Persons in respect of whom such prohibitions apply must not access this website.

I Disagree