hongkongen
Translating universal goals into SDG impact

Translating universal goals into SDG impact

22-09-2021 | Insight
With the SDGs, the UN has framed the need and drawn the blueprints to advance sustainable development in society. With its SDG Framework, Robeco has created an SDG scoring tool and a suite of SDG-linked strategies that advance sustainable impact exposure in investment portfolios.
  • Jan Anton van Zanten
    Jan Anton
    van Zanten
    SDG Strategist
  • Taeke  Wiersma
    Taeke
    Wiersma
    Head of Credit Research

Speed read

  • ESG and SDG are acronyms not synonyms, ESG integration does not equal SDG impact 
  • Robeco employs a rigorous and systemic approach to measuring SDG impact 
  • The SDG Framework forms the backbone of a suite of SDG-focused investment strategies

For the first time in history, the world has a shared plan for promoting sustainable economic growth, advancing social inclusion and safeguarding the natural environment. The UN SDGs represent a workable blueprint to creating a better world for ourselves and future generations. 

Universal good-will and global progress are not only noble, they are also necessary to fully optimize global assets and achieve economic growth that is truly sustainable for all. But how can investors translate lofty goals of supranational bodies into specific actionable steps that inform portfolio investment decisions? How can investors be sure their invested capital is moving the world in the right direction? 

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

ESG and SDG, acronyms not synonyms

The rise in investor interest in ESG investing raises awareness and mobilizes financing for sustainability issues, both of which significantly enhance the ability to achieve the SDGs.

But many investors conflate ESG integration with SDG impact. Though ESG integration helps investors avoid companies that are not adequately managing environmental, social, and governance risks, it does not measure a company’s positive SDG impact. This is further supported by the fact that some notoriously harmful companies in industries such as tobacco or sugared beverages often perform well in ESG rankings.

ESG ratings can be useful for determining many aspects of a company’s sustainability performance, but they are insufficient for measuring whether companies are positively influencing the SDGs. A much deeper analysis and more thorough metrics are needed to better understand companies’ SDG performance.

How can investors translate lofty goals of supranational bodies into specific actionable steps that inform portfolio investment decisions?

Impact ingredients

Impact investing is a broad term that can be misapplied. Robeco differentiates between impact-aligned investing and impact-generating investing1. The former puts assets to work in companies that are moving towards (and not against) sustainable goals and impact. The latter induces investors to positively impact a status quo that would otherwise have remained unchanged without their investment and/or influence, for instance through active ownership. Both are useful as investors are a diverse group and some will prefer one type of impact over the other. 

Despite these distinctions, all impact investing strategies should contain some essential ingredients. Impact should be measurable, it should be aligned with generating a financial return, and it should be additional, meaning investors’ actions make an appreciable difference to changing the status quo.

Attracting attention

In short, impact investing takes sustainable investing to the next level. It not only requires that the right inputs and actions are present but also that the right outputs and outcomes are produced. Surveys indicate that creating positive impact is important for many market segments and particularly for women and millennials. Given that these groups will be in charge of trillions of assets in the coming decades, there is tremendous opportunity/potential to put their assets and motivation to work in creating positive impact and sustainable progress.  

However, it is becoming increasingly important for asset managers to ensure the quality and rigor of their impact claims as more investors move into impact investment strategies and financial regulators tighten impact-labeling standards.

A rigorous approach

The Robeco SDG Framework rigorously measures and scores companies based on their SDG contributions. It is a systematic approach to capturing SDG impact of equity and credit issuers that is objective, disciplined and replicable. It consists of a three-step sequence that starts with an assessment of the impact of a company’s products and services. Step two consists of an in-depth analysis of the impact of its operations, internal policies and structures. The process ends with a screening and review of corporate controversies that could negatively influence SDG progress, and hence a company’s SDG impact. The final results of this three-step analysis are quantified in an SDG score. 

SDG scores, together with the macroeconomic outlook, fundamental analysis, sustainability research and ongoing risk management help investment teams reduce downside risk and select the most promising stocks for investment portfolios.

Empirical evidence supports our view that screening credit and equity holdings for their SDG impact and sustainability characteristics is positive for performance

Empirical evidence supports our view that screening credit and equity holdings for their SDG impact and sustainability characteristics is positive for performance. The SDG Framework and resulting SDG scores strengthen the ability of our investment teams to screen out poor performers and does not impede their capacity to generate alpha through issuer and stock selection. 

Moreover, tracking the SDG contributions of companies provides investors assurance that they have diversified exposure to SDGs as well as diversified exposure to quality companies across the economy with vision and commitment towards a sustainable future. 

Pioneering tradition, leading position

Robeco’s SDG Framework is characteristic of our pioneering spirit, investment acumen and disciplined rigor in developing advanced investment tools and strategies. It enabled us to be among the first to bring an SDG-focused credits product to the market and forms the backbone of Robeco’s suite of SDG-linked fixed income and equity investment strategies. It also underscores our ability and commitment to translating complicated concepts into actionable steps within the investment process. 

The SDG Framework along with our SDG-linked products help investors steer capital towards companies that are generating positive impact, meaningful returns and continued progress in the right direction.

1Busch, T., Bruce-Clark, P., Derwall, J., Eccles, R., Hebb, T., Hoepner, A., ... & Weber, O. (2021). “Impact investments: a call for (re) orientation”, SN Business & Economics, 1(2), 1-13.

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