hongkongen
Fact or fiction: SI is a niche form of investing

Fact or fiction: SI is a niche form of investing

Insight

Sustainability investing has sometimes been considered niche – so the sheer size of it may come as a surprise. While some areas are indeed still niche, such as impact or thematic investing, the SI world is now a multi-trillion dollar industry that is becoming mainstream as more people commit to it every day.

  • Guido Moret
    Guido
    Moret
    Active Ownership Specialist
  • Masja Zandbergen
    Masja
    Zandbergen
    Head of ESG integration

Speed read

  • UNPRI signatories manage USD 70 trillion in assets in 50 countries
  • ESG is now routinely integrated and applied to multiple sectors
  • Paris Agreement and other regulation is changing the landscape

The practice of investing sustainably certainly began as a niche investment concept in the 1990s when Robeco was among the first investors to start taking it seriously. At the time, the focus was on what was then (and sometimes still is) called Socially Responsible Investing and mostly revolved around excluding undesirable industries such as tobacco or weapons manufacture from portfolios. Actual investments tended to be highly specific, in niche industries such as organic food or the then nascent renewable energy business, and only in equities.

Two decades later, sustainability investing has massively broadened its horizons to focus on environmental, social and governance (ESG) factors that are increasingly integrated into the investment process across all asset classes. In Europe, more investors are now engaged in it than those that are not, with 52.6% of all assets managed under SRI at the end of 2016, according to the Global Sustainable Investment Alliance.1

Discover all 9 new ideas on sustainability investing in our book

Download it now
Money invested in types of SI strategy globally, 2014-2016.
Source: Global Sustainable Investment Alliance Review 2016

Indeed, so widespread is sustainability investing in Europe that many asset managers are now playing catch-up, according to asset management analytics firm Cerulli Associates. “The stampede to address ESG concerns has left European fund managers running faster to stand still. Asset management companies have raised their game, and so have the companies in which funds invest,” the company said in its September 2017 newsletter.2

One way to gauge the sheer scale of SI globally is to look at figures from the United Nations Principles for Responsible Investment, which works to encourage sustainability investing using six guiding principles. It now has 1,750 members; Robeco and RobecoSAM were among the original signatories. Operating in 50 countries, UNPRI signatories collectively manage about USD 70 trillion in investments, equivalent to three times the GDP of the United States.3

Source: UNPRI

Other international groups have emerged to promote sustainability investing. The International Corporate Governance Network (ICGN) is dedicated to improving the G in ESG, and now has over 600 members managing assets of USD 26 trillion.4 In the US, the Forum for Sustainable and Responsible Investment (USSIF) reports that assets which are managed sustainably have rocketed from under USD 1 trillion in 1995 to above USD 8.7 trillion at the end of 2016, accounting for 20% of the entire investment market.5

Integrated ESG

For Robeco, sustainability investing has been mainstream for many years. ESG is routinely integrated into the investment processes of the entire fundamental equity, fixed income and quantitative ranges of strategies. Of the EUR 152 billion in assets under management at September 2017, some EUR 91 billion is explicitly managed using integrated ESG, or 60% of the operating business. For other funds, other forms of ESG integration is implicit, since sustainability factors are always taken into account, although they may focus more on regionally or industrially specific issues.

Another way to gauge how widespread sustainability is used in the investment industry can be seen in Requests for Proposals (RfPs) – detailed forms that prospects send to asset managers asking about their products. Questions regarding ESG and sustainability now appear in 90% or more of all the RfPs received by Robeco, and the level of detail needed is getting longer. For example, potential investors now want to know the level to which sustainability is integrated and how it is done, rather than simply whether an asset manager adheres to the UN PRI.

With that, the ability of an asset manager to offer sustainability funds has become more important in recent years. Evestment, a global specialist in institutional investment data and analytics, has expanded its ESG data collection efforts with asset managers to satisfy the rising demand from investors for greater transparency into the managers’ sustainability investing practices, reporting “a 150% increase in ESG screening activity worldwide in the last 18 months."6

The truth about sustainability investing: fact & fiction
Watch the video

Regulations and risk

Finally, politics and regulation is putting sustainability higher up the political agenda. The European Commission in January set out the recommendations of its High-Level Expert Group on Sustainable Finance to “deliver a roadmap for a greener and cleaner economy” across the EU.7

Most notably on the regulatory front is the Paris Agreement, which commits nations to limiting global warming to below 2 degrees Celsius and ideally to a maximum of 1.5 degrees above pre-industrial levels. This is having a profound effect on how the world creates energy, shifting away from fossil fuels and into renewables such as wind farms or solar power.

Much of this investment remains in thematic or impact funds, but it has become the fastest-growing area of sustainability investing, as nations take their commitments to combating climate change more seriously. Combined with the surge in use of integrating ESG in traditional equity or fixed income funds, sustainability is gradually moving to niche to mainstream to become the norm, and is likely to grow further.

1 Global Sustainable Investment Alliance 2016 Review
2 Cerulli Associates, the Cerulli Edge, European Monthly Product Trends, September 2017
3 For more information, see the United Nations PRI
4 For more details about the ICGN, see
5 US Forum for Sustainable and Responsible Investment, ‘Report on US Sustainable, Responsible and Impact Investing Trends’, 2016
6 Fundfire, ‘Evestment expands how managers report ESG data, October 2017
7 European Commission, ‘Final report of the High-Level Expert Group on Sustainable Finance’, January 2018

Sustainability Investing
Sustainability Investing

Discover all 9 new ideas on sustainability investing online.

Read more

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.

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