hongkongen
Robeco strengthens exclusions policy for fossil fuels

Robeco strengthens exclusions policy for fossil fuels

24-09-2020 | Insight
Robeco is extending its exclusion policy for fossil fuel producers and users to its entire range of strategies to help combat global warming.
  • Carola van Lamoen
    Carola
    van Lamoen
    Head SI Center of Expertise
  • Victor  Verberk
    Victor
    Verberk
    CIO Fixed Income and Sustainability and Portfolio Manager of Robeco Global Credits

Speed read

  • Move affects firms active in thermal coal, oil sands or Arctic drilling
  • Exclusions cover 236 companies and apply to Robeco’s entire range
  • Wider aims are to meet the Paris Agreement and reduce investment risk

Companies that derive 25% or more of their revenues from thermal coal or oil sands, or 10% from Arctic drilling, will be barred from Sustainability Inside investment portfolios – the majority of strategies at Robeco – by the end of the fourth quarter of 2020.

This expands the thermal coal exclusion policy that had previously only applied to the more bespoke Sustainability Focused and Impact Investing strategies. It also bars investment in companies actively engaged in oil sands and Arctic drilling for the first time. It means 236 fossil fuel companies in the energy, mining and utilities sectors will join the exclusions list.

Stricter thresholds will be applied to Sustainability Focused and Impact Investing portfolios, excluding companies with just 10% of their activities in thermal coal and oil sands, or 5% in Arctic drilling. As a result of the expansion, the exclusions policy covers the entire range of UCITs-registered strategies at Robeco, accounting for EUR 144 billion of assets under management.1

“Although the preferred approach is to engage with companies, we believe it is very difficult to drive significant change at companies whose portfolios are skewed to coal or oil sands,” says Carola van Lamoen, Head of Robeco’s SI Center of Expertise. “Therefore, we prefer to put our efforts into sectors and companies, where we have more confidence that our engagements will be effective.”

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

Limiting global warming

The move forms part of a wider climate change policy to support the goals of the Paris Agreement, which aims to limit the rise in global temperatures to a maximum of 2 degrees Celsius above pre-industrial levels, and ideally to 1.5 degrees or below.

“Our move to exclude investments in fossil fuels from our funds is a further step in our efforts to lower the carbon footprint of our investments, transitioning to a lower carbon economy,” says Victor Verberk, Chief Investment Officer at Robeco. “As the global leader in sustainable investing, we are committed to the Paris agreement, which aims to limit the rise in global temperatures to well below 2 °C. This will require substantial reductions in global greenhouse gas emissions over the next few decades.”

Robeco’s ranges

Robeco has had an exclusions policy since 2005 and has routinely integrated environmental, social and governance (ESG) factors into the investment process since 2010. In 2019, Robeco went one step further and reclassified its range of more than 200 investment strategies, to give clients a clearer choice in the level of sustainability they wished to adopt. This led to the creation of three categories of strategy: Sustainability Inside, Sustainability Focused and Impact Investing.

Sustainability Inside strategies integrate ESG information into the investment process as standard. Sustainability Focused strategies have a targeted ESG profile and an environmental footprint that is better than the benchmark. Impact investing strategies are specifically aimed at making a positive contribution to themes such as the Sustainable Development Goals.

Why thermal coal, oil sands and the Arctic

Thermal coal producers and users in the mining and utilities sectors are being excluded because it is by far the highest carbon-emitting source of energy in the global fuel mix. In addition to carbon emissions, when coal is burned it also releases poisonous toxins including mercury, sulfur dioxide, lead and other heavy metals. Aside from global warming, this leads to significant health impacts, from asthma to cancer.

Oil sands are among the most carbon intensive means of crude oil production, generating 80 kilograms of CO2 per gigajoule compared with 50 kg CO2/GJ for natural gas. This is due to the higher emissions created from the fuel used during extraction, and while preparing the raw material for refining.

Drilling for oil or gas in the Arctic Ocean poses higher risks of spills compared to conventional oil and gas exploration, and has potential irreversible impacts on the sensitive Arctic ecosystem, the region’s indigenous people and the global climate. Although Arctic drilling is not fully commercially viable at this time, and is not expected to be so in the near future, several big Arctic oil projects are still under development. This means the thresholds are largely preemptive and no companies are excluded under this policy today.

No harm seen to returns

Verberk points out that the stricter exclusions policy is not expected to harm investment returns – rather, it can insulate investors from those companies that are unwilling to move their business models towards a low-carbon economic model.

“If the global economy decarbonizes in line with the recommendations of the International Panel on Climate Change (IPCC), the excluded companies will be some of the most significantly impacted,” he says. “This implies lower returns or higher risk as they lose business or have to invest in alternative areas where they may not have expertise. This transition could be easier for some than others.”

“We believe there are sufficient opportunities to invest in companies with similar risk/return profiles, so that the impacts on investment performance will be limited.”

Exclusions list

The exclusions come on top of contentious industries that are already barred from portfolios – either in absolute terms, or according to thresholds. Robeco’s full exclusion policy and list is available here .

1 Assets under management in ESG-integrated strategies at 30 June 2020.

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.

Logo

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. The Company does not hold client assets and is subject to the licensing condition that it shall seek the SFC’s prior approval before extending services at retail level. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.

2. Important risk disclosures
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 to be accessed by “professional investors” only (as defined in the Securities and Futures Ordinance (Cap.571) and/or the Securities and Futures (Professional Investors) Rules (Cap.571D) under the laws of Hong Kong). 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
This website includes material from third parties or links to websites maintained by third parties some of which is supplied by companies that are not affiliated to Robeco. 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. Third party off-site pages or websites are provided for informational purposes only.

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 the “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