There is a heavy emphasis on protecting the finite resources of our planet through decarbonization and resource management along with promoting human development through greater diversity in the workplace. This year’s topics are ‘Net zero emissions’; ‘Natural resource management: water and waste’; ‘Diversity and inclusion’; and ‘Nature Action 100’.
Every year the Robeco Active Ownership team chooses new engagement themes to focus on over the coming three years. Engagement is conducted with investee companies in which Robeco owns equities or bonds. It has proved highly successful in improving their metrics on environmental, social and governance (ESG) metrics on the relevant issues over many years.
1. Net zero emissions
The net zero emissions theme follows on from an existing commitment to make all Robeco’s assets under management carbon neutral by 2050. This forms part of wider international pledges to meet the Paris Agreement, which aims to limit global warming to 2 degrees Celsius or less by 2100, which in turn requires the world to become carbon neutral by 2050.
“The COP26 climate summit has again stressed the need to further increase engagement on net zero emissions for investors,” says Carola van Lamoen, Head of Sustainable Investing at Robeco. “This engagement theme will be an expansion of the one launched in 2020, focusing on high carbon-emitting companies that have made some progress but are still lagging in their transition to net zero.”
“In scope are companies that score amber on the traffic light system, compared to companies that are at red and at risk of failing in the transition, and are then selected for enhanced climate engagement in the ‘Acceleration to Paris’ theme that was launched in 2021.”
2. Natural resource management
The natural resource management engagement will focus on companies for whom the management of both water use and water waste is a material issue. Investors need to account for the amount of fresh water that is needed to make certain products – often drawn from places where water is already scarce – while the discharge of toxic waste remains problematic.
“The theme combines the issues of water and waste from both an input and output perspective,” says Peter van der Werf, Senior Manager for Engagement. “This provides the flexibility to engage on other incident driven events around natural resource use.”
“Water and waste are critical factors that influence planetary boundaries. Environmental regulation is rapidly increasing for both corporates and investors. So, this engagement theme will focus on companies that face environmental issues such as seabed and land mining, emissions of PFA chemicals, water scarcity, agrochemical waste and plastic waste.”
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3. Diversity and inclusion
Human development is also vital to a more sustainable and prosperous world, particularly in reaping the rewards that greater inclusion can bring. This theme builds on prior work in promoting great diversity in the workplace, trying to achieve equal rights – particularly for female participation in more senior roles, including at board level – and making sure that every voice is heard.
“Companies play a crucial role in creating diverse and inclusive (D&I) workplaces through their human capital strategy,” says Engagement Specialist Laura Bosch. “Evidence is mounting to show how considering a range of views, backgrounds and experience can help achieve long-term sustainable returns, as well as stay in line with the direction in which business is heading.”
“Our engagement will aim to improve embedding D&I in companies' human capital strategies, setting clear targets to strengthen D&I practices and outcomes. We also expect companies to measure and disclose meaningful data and outcomes related to workforce composition, promotion, recruitment, retention rates and equity pay practices.”
4. Nature Action 100
The final theme is a new collaboration to protect the natural environment and the millions of species of animals, plants and sea life that live within it – many of which are threatened by human development. It builds on prior biodiversity work and is modeled on the existing ClimateAction 100+ partnership with other investors. Robeco is one of the lead investors driving development of the new collaborative engagement.
“The IPBES Global Assessment Report on Biodiversity and Ecosystem Services reported that approximately 25% of all species on Earth is at risk of extinction by 2050, representing roughly one million species of plants and animals,” says Van Der Werf. “By the end of the century, 50% or more of all species will be at risk.”
“This engagement will be part of a global collaborative engagement program, building on the lessons learned from Climate Action 100+. The focus of the engagement will be on terrestrial, fresh water and marine biomes. We will address their dependencies and potential impact on biodiversity, such as deforestation, overfishing and pollution.”
Webinar: Our outlook for SI and engagement themes for 2022
Higher demand for sustainable investing strategies is set to continue in 2022 as the world works towards net zero emissions. Stricter rules such as the EU’s Sustainable Finance Disclosure Regulation will put greater emphasis on whether SI funds are as sustainable as they claim. And society is demanding more action on climate, biodiversity and human rights as we emerge from Covid-19.