We will set five-year carbon footprint reduction goals

We will set five-year carbon footprint reduction goals

22-02-2021 | Interview
Decarbonization in the making. Robeco recently announced its ambition to achieve net zero greenhouse gas (GHG) emissions by 2050 across all its assets under management. Decarbonization targets will be set for all our strategies, in line with our commitment to the Paris Climate Accord. But what does that change in practice for investors? We discussed the consequences with Guido Moret, head of sustainability integration in credits, and Arnoud Klep, portfolio manager from our quant equity team.
  • Arnoud Klep
    Portfolio Manager
  • Guido Moret
    Head of Sustainability Integration Fixed Income

Speed read

  • New climate fixed income strategies, a yardstick for other portfolios
  • Several sustainable quant equity strategies to become Paris-aligned
  • If firms fail to reduce emissions, investors will face additional constraints

Could you explain the idea behind this pledge?

Guido Moret: “This announcement was made as Robeco helped launch the Net Zero Asset Managers initiative, which fostered the commitment of 30 asset managers representing USD 9 trillion in assets to help achieve net zero GHG emissions by 2050 or sooner. With this, we want to give more substance to our support to global efforts to limit global warming to 1.5°C, as agreed in the Paris Climate Accord.” 

The Paris Agreement was signed in 2015. So, it was time to take bolder steps

From now on, we will set five-year goals in terms of carbon footprint reduction across all our portfolios. This is no small feat. To give you an idea of the disruption needed, the pandemic only cut CO2 emissions by a mere 12% to 15% at best in 2020. That’s the reduction we’ll need to achieve every two years to get near to zero by 2050.”

So, where do you start, then?

G.M.: “This will be a learning process. In December 2020, we launched two new climate fixed income strategies. These are the first global fixed income strategies to be fully compliant with the EU benchmark regulation for Paris-aligned investments. They will represent a yardstick for other fixed income portfolios, including quantitative strategies.

“The two strategies will aim to reduce their weighted carbon intensity by 7% year on year, while outperforming their Paris-aligned benchmarks. This will be done taking into account scope 1, 2 and 3 GHG emissions. In other words, we will be taking into account all emissions, direct and indirect ones, including those of each company’s value chain.”

Arnoud Klep: “On the quant equity side, we plan to bring several of our sustainable strategies in line with the Paris Climate Accord in the coming months. The first will be one of our Global Sustainable Conservative Equity strategies, for which we have already completed the client consultation process and received the greenlight from existing clients.”

“This strategy will become ‘Paris-aligned’ as early as March 2021. The most important change will obviously be a much stricter carbon footprint reduction objective. Currently, our entire sustainable quant equity range has a reduction objective of 20% relative to its reference index. We would implement a 50% reduction as a starting point. In addition, we would target a 7% footprint reduction every year thereafter.”

OK. But how do you concretely manage to reduce your carbon footprint?

G.M.: “There are several ways to do this. The first one is to stop investing in certain businesses that are incompatible with net zero emissions. This means, for instance, excluding all production of fossil fuels. Meanwhile, you would still be able to invest in other sectors, but their emissions would need decrease by 7% every year, on average, to remain investable.”

While our sustainable quant equity portfolios have already reduced exposure to the energy sector, restrictions will become even stricter once they are Paris-aligned

A.K.: “So, to give you an example, while our sustainable quant equity portfolios have already reduced exposure to the energy sector, restrictions will become even stricter once they are Paris-aligned. Companies involved with thermal coal will be excluded, and so will most oil & gas companies, especially the oil majors. Restrictions on electric utilities will also be much tighter.”

OK. But would these kind of restrictions be realistic for all our portfolios?

G.M.: “In the short term, divesting from fossil fuel producers overnight across all portfolios would be next to impossible. In the longer term, achieving the 7% annual decrease target will largely depend on the path we take collectively towards net zero emissions. If companies fail to reduce their emissions to the extent needed, we will face additional constraints.”

A.K.: “Indeed, if we, as a global community, do manage to decrease our GHG emissions over time, then the 7% decrease target may never become a significantly restrictive constraint for stock or bond selection. But if companies do not succeed, then asset managers will have to compensate, and the 7% reduction target may become more difficult to achieve.”

One way we can support the transition towards net zero emissions is through engagement with companies

G.M.: “One way we can support the transition towards net zero emissions is through engagement with companies. Another way would be to compensate GHG emissions, for example through carbon capture and storage, reforestation, or simply more sustainable agricultural practices. But all these options come with challenges and limitations, and there is no silver bullet.”

Decarbonizing portfolios will necessarily have an impact on their profile. What consequences should investors expect?

G.M.: “In fixed income, our tests suggest the risk-return profile of portfolios should remain practically unchanged, or even improve. Decarbonizing would lead to lower returns but also even lower risk, and therefore improved Sharpe ratios. One reason for this is that the energy sector was among the most volatile recently, due to its relatively high correlation with oil prices. So, by excluding fossil fuel-related businesses you mechanically lower volatility in the prevailing conditions.”

A.K.: “For quant equities, our simulations show that we can build Paris-aligned portfolios that still enable strong factor exposures. In theory, limiting the opportunity set should bear some cost in terms of performance. And this is what we actually find, although in a global investment universe with ample investment opportunities the impact is limited: Paris-aligned quant equity strategies would be able to capture about 90% to 95% of the risk-return potential compared to the standard quant equity strategies.”

“But these simulations are based on past prices and therefore assume that there is no alpha potential from getting a strategy Paris-aligned. If climate change-related risks, like stranded assets or transition risks, rise and materialize, then we will not be discussing the negative impact of getting Paris-aligned but rather its positive effect. So, it is also a matter of perspective.”

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.



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