We nurture a culture in which new ideas are welcomed and encouraged. We analyze facts and data as we believe every investment decision should be research-based. This is no different for transition investing. Our decades of research in sustainable investing provides a solid base of frameworks equipping us to make better informed decisions while investing for transition.
Overview of our Sustainable Investing Framework areas that offer predominantly financial or impact materiality.
The major difference between sustainable investments and transition is forward-looking data. By definition, sustainable research investigates mainly what has happened thus far. The real magic in transition investing is determining what will happen if a transitional pathway is followed. Targets typically include emission reductions, engagement and investments in climate solutions, with the ultimate aim of reducing real-world emissions and enabling the transition to a low-carbon economy. What constitutes a transition eligible investment? Robeco has a number of innovative tools, generating data that reveal companies’ transitioning progress.
Climate Traffic Lights
What does it measure?
This tool calculates whether a company’s projected emissions are in line with its required sector decarbonization pathway under a well below 2°C scenario. As a second step, it checks whether verified targets and a credible plan are in place to achieve its emission-reduction goals. This can determine whether the company should be included in portfolios.
How is it applied?
A green light indicates that the company is ‘aligned’ or ‘still aligning’ with its decarbonization pathway; an amber light for those which are ‘partially aligned’ (i.e. those in transition); and a red light for those that are ‘misaligned’. Companies that are lagging with red lights can be put into engagement programs to improve their progress.
Climate Solution Scores
What does it measure?
Successfully decarbonizing the economy requires not only a focus on reducing emissions, but also significant investments in low-carbon solutions. The Climate Solutions Score aims to reward companies who are already investing and generating revenues from such climate solutions.
How is it applied?
The Climate Solutions Score is determined based on the percentage of a company’s green revenues. Specific thresholds are used to assign scores to the positive contributions of a product based on the maturity level of an activity. For example, the threshold for revenues from electric vehicle sales would be lower than the threshold from renewable energy generation. The thresholds will be ratcheted up over time as the net-zero transition unfolds.
ESG Bond Framework
What does it measure?
The market for ESG-labeled bonds such as green bonds is growing, but is awash with concerns about greenwashing – meaning the bond pretends to progress environmental issues more than it is. Robeco developed a five-step framework to properly assess the ESG bond credentials to invest in green bond or credit portfolios. This accountability the framework provides is essential to really make a difference to the transition.
How is it applied?
In the first three steps, we assess whether the bond meets the labeled ESG objective along with the stipulated allocation of proceeds, and whether the sustainability targets are material. Then we scrutinize the impact reporting, the issuer’s sustainability strategy and its issuer’s conduct. The bond must pass each step to be eligible for Robeco’s strategies – many do not, and are rejected.
SDG Framework
What does it measure?
The framework allows us to better understand the economic transition, beyond climate, and steer capital to companies that are supporting society and economies move toward sustainability. It calculates the contributions that companies can make to one or more of the 17 SDGs. It uses net contributions, since companies can often make both a positive and negative contribution, depending on the product. The SDG’s product impact focus helps us to allocate capital to companies that are supporting society and economies move towards sustainability, beyond just climate transition.
How is it applied?
Originally, the framework was developed for bespoke SDG funds that only bought the credits of companies with positive scores. Now, it is used across our company as a means of evaluating the sustainability of potential investments, including the multi-asset range.
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