hongkongen
Sustainability investing on the rise in Asia

Sustainability investing on the rise in Asia

12-10-2017 | Column

In the past weeks I have visited many Asian institutional investors to talk about sustainability investing. I was positively surprised by the amount of genuine interest in the topic. There was considerable appetite for knowledge sharing and most investors informed us they were starting the process of implementing sustainability in their investment portfolios.

  • Masja Zandbergen
    Masja
    Zandbergen
    Head of ESG integration

Their success in achieving this will depend on the extent to which the many parties active in the field of sustainability offer sufficient research on local companies and whether the right investment solutions exist. In both cases a more Asia-oriented approach is needed. Furthermore, it struck me how important the human element is and that those investors who are genuinely interested in and committed to the topic will be the most successful in achieving change.

Sustainability investing on the rise in Japan

Japan is a country where sustainability investing seems to be really picking up. The two days I was there were completely packed with meetings. The clear momentum in this country is being driven by the introduction of the corporate governance and stewardship codes and by the fact that large institutions are taking the lead and committing parts of their portfolio to responsible investing. Some are more vocal about it than others. I met with one large pension fund that has actually been investing in a best-in-class ESG portfolio for many years, but has not really communicated this to the outside world. As humility is wisdom in Japan, most investors emphasize that they are still in the early stages and are still learning about sustainability investing. Let’s hope this will lead to action in the future.

Large institutional investors are taking small steps

In other Asian countries I met with some larger institutional investors who seem to be taking smaller steps. They are developing ESG questionnaires to use in their selection process to assess managers’ sustainability investing strengths. Having a sound ESG policy and practices is already a prerequisite for asset managers working with Northern European clients, but I believe it will soon be a prerequisite globally. We shared with them our belief in the importance of a thorough assessment of a manager’s ESG practices. It is no longer enough to be a UNPRI signatory, implicitly take ESG into account, or occasionally engage with the companies in your portfolio. How you implement the UN principles, how you structurally take ESG into account, and engage with companies and keep track of results, are what it’s all about.

These institutions are also working on implementing ESG integration in their own (local) portfolios, but they face many hurdles. These include building up knowledge and investing in teams, low coverage of local small and midcap companies by ESG research providers, deciding which providers to use for voting and how to effectively set up engagement with companies and collaborate with other investors. Sharing our knowledge with them will speed up the process and help investor engagement across the globe.

Moving from A(lpha) to B(elief)

On the private and retail banking side there is a clear need to show clients the alpha potential of an ESG strategy and to develop products customers can relate to. Even though research shows that private investor demand for sustainable investment solutions is increasing, this was not the general feeling I got from the banks I met. There is demand from ultra-high net worth clients and this will be fulfilled, but it is still a challenge to provide solutions for high net worth clients and others. I am afraid hiding behind the alpha search argument is going to hold back developments. It is much more effective to have a clear vision and to believe in the importance of ESG for investors and society alike. I am sure those that do will be successful in both of the major aspects (wealth and well-being).

The meetings I enjoyed most were those attended by top management and the people actually responsible for implementing ESG in portfolios. Both top management and the ESG specialists were highly motivated and of course there were questions on alpha creation, but it seemed as if this station had already been passed. Those present were very engaged and asked relevant questions on the implementation of voting, engagement, quantitative ESG research, manager selection etc. It reinforced my opinion that building human (intellectual) capital is extremely important in furthering ESG efforts in our industry. It all comes down to the people.

Carbon footprint of the trip

Flying to five countries in Asia probably did not contribute to a better environment, which is actually one of the reasons I went. So that is a bit of a contradiction. At Robeco, we are aware that even though direct CO2 emissions are not a major aspect of our company’s business, traveling can still have a significant impact. So this is why we try to reduce our carbon footprint and compensate the remainder. Robeco has signed a declaration stating that we aim to reduce the CO2 emissions resulting from the activities of every one of its employees. Robeco has achieved CarbonNeutral® certification by reducing CO2 emissions to net zero in accordance with The CarbonNeutral Protocol.

This is our monthly column on sustainability investing by Head of ESG integration Masja Zandbergen.

Important information

The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong.
This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing
This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions.
The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.

Subjects related to this article are:

Disclaimers

1. General
Please read this information carefully.

This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.

2. Important risk disclosures
Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:

  • Some Funds are subject to investment, market, equities, liquidity, counterparty, securities lending and foreign currency risk and risk associated with investments in small and/or mid-capped companies.
  • Some Funds are subject to the risks of investing in emerging markets which include political, economic, legal, regulatory, market, settlement, execution, counterparty and currency risks.
  • Some Funds may invest in China A shares directly through the Qualified Foreign Institutional Investor (“QFII”) scheme and / or RMB Qualified Foreign Institutional Investor (“RQFII”) scheme and / or Stock Connect programmes which may entail additional clearing and settlement, regulatory, operational, counterparty and liquidity risk.
  • For distributing share classes, some Funds may pay out dividend distributions out of capital. Where distributions are paid out of capital, this amounts to a return or withdrawal of part of your original investment or capital gains attributable to that and may result in an immediate decrease in the net asset value of shares.
  • Some Funds’ investments maybe concentrated in one region / one country / one sector / around one theme and therefore the value of the Fund may be more volatile and may be subject to concentration risk.
  • The risk exists that the quantitative techniques used by some Funds may not work and the Funds’ value may be adversely affected.
  • In addition to investment, market, liquidity, counterparty, securities lending, (reverse) repurchase agreements and foreign currency risk, some Funds are subject to risk associated with fixed income investments like credit risk, interest rate risk, convertible bonds risk, ABS risk and the risk of investments in non-investment grade or unrated securities and the risk of investments made in non-investment grade sovereign securities.
  • Some Funds can use derivatives extensively. Robeco Global Consumer Trends Equities can use derivatives for hedging and efficient portfolio management. Derivatives exposure may involve higher counterparty, liquidity and valuation risks. In adverse situations, the Funds may suffer significant losses (even a total loss of the Funds’ assets) from its derivative usage.
  • Robeco European High Yield Bonds is subject to Eurozone risk.
  • Investors may suffer substantial losses of their investments in the Funds. Investor should not invest in the Funds solely based on the information provided in this document and should read the offering documents (including potential risks involved) for details.

3. Local legal and sales restrictions
The Website is not directed at any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the publication or availability of the Website is prohibited. Persons in respect of whom such prohibitions apply or persons other than those specified above must not access this Website. Persons accessing the Website need to be aware that they are responsible themselves for the compliance with all local rules and regulations. By accessing this Website and any of its pages, you acknowledge your agreement with understanding of the following terms of use and legal information. If you do not agree to the terms and conditions below, do not access this Website or any pages thereof.

The information contained in the Website is being provided for information purposes.

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. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.

4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.

5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.
Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.

6. Third party websites
Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage.

7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.
Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.
Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.

8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.

9. Privacy
Robeco guarantees that the data of persons accessing the Website will be treated confidentially in accordance with prevailing data protection regulations. Such data will not be made available to third parties without the approval of the persons accessing the Website, unless Robeco is legally obliged to do so. Please find more details in our Privacy and Cookie Policy.

10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong. 

Please click “I agree” button if you have read and understood this page and agree to the Disclaimers above and the collection and use of your personal data by Robeco, for the purposes for which such data is collected and used as set out in the Privacy and Cookie Policy, including for the purpose of direct marketing of Robeco products or services. Otherwise, please click “I Disagree” to leave the website.

I Disagree