‘We must not misrepresent sustainability as a one-dimensional issue'

‘We must not misrepresent sustainability as a one-dimensional issue'

01-05-2019 | インサイト

Sustainable investors face plenty of choices. Masja Zandbergen talks about the dilemmas investors face when embracing sustainability, the progress made over the past years and the conviction that it takes real commitment to be among the winners in this area.

  • Peter van Kleef
    van Kleef
    Chief Editor

Sustainability is the industry’s Next Big Thing. Was there a specific turning point, or did sustainable investing evolve gradually at Robeco?

“Both, actually. It did evolve, starting off with a few people. Now everyone’s involved and I even think it’s a reason why people want to work at Robeco – because it’s such a big theme here. But over the last two years, it’s really gained traction. That’s partly due to the market, regulations, climate issues, problems with litter – you can’t ignore it anymore. And these issues are important to the new generation, whose opinions matter more and more. Many different forces are converging right now. As a society, we have to live more sustainably, otherwise, we just won’t make it.”

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Are we now in an era of real change?

The recent engagement success with Shell might be evidence of this. Are people mentally ready for big changes? Do they realize that it’s not only about returns, but also the future of our planet and of our children?

“I find that difficult to answer – maybe because I am too closely involved. I only end up talking to clients who are already on the same wavelength. In all honesty, I think we still have a long way to go, even though you can already see things changing. Companies have to be willing to make investments that won’t pay off for a very long time. That is still a dilemma.”

The eternal conflict between short-term gains and a long-term perspective.

“Yes, and between financial and environmental and social values. Common goods don’t have a price, but they ought to. We are all willing to pay lip service to sustainability being a win-win, but oftentimes you have to pay the costs before you can reap the benefits. You have to be honest about that. Yes, you want to achieve returns, but you also want social values and the environment to be factored into investment decisions. You have to put a price on that. In that respect, this is the start of a very long road and the question is whether we still have enough time (...).”

Time for what?

“Time as a planet. To fix everything.”

Is that something you lose sleep over?

“Well, let’s just say sometimes I’m sent research by colleagues and specialists that’s quite depressing. Research about the prospects with regard to climate change, and the consequences. But I am optimistic. If we work hard now, then hopefully we can still make it.”

Is a world in which big multinationals are required to invest some of their profits in the working conditions at the start of the production chain akin to utopia?

“I don’t think that’s a very good solution, because it still wouldn’t form an integral part of business practices. I would approach it differently. More economic models should be developed that include those external costs in the profit and value calculations. How much does a shoe actually cost if you factor in a fair salary for all the employees – at minimum living wages – and take the cost of certain environmental measures into account? How much margin would the company have left? And are consumers willing to pay a premium? A lot of the stuff we have now is actually much too cheap.”

It’s that same dilemma again. We know things have to change, but if that requires us to contribute – financially or otherwise – we look the other way?

“Yes, and that’s why I think we’re only at the start of a very long process of internalizing those external costs. There aren’t any generally accepted models for it yet. Universities are not yet including it in their financial curricula.”

Is education the solution?

“It’s certainly part of the solution. That’s why we are working with Erasmus University. They have also outlined a preliminary framework to incorporate sustainability into financial analysis.”

Change also starts with awareness. The new generation is growing up with a greater awareness of the challenges of sustainability.

“That’s definitely true for my kids. We often talk about it at home – how certain items of clothing are made, for instance. It happens automatically because it is part of both my and my husband’s work. Everyone has their own work-related preoccupations, so that’s probably why we talk about it at home more often than other people do. Our children have it instilled in them regularly. Avoiding or eating less meat, or just doing things more sustainably – it’s much more a matter of course for the new generation than for us.”

But the solution to our problems is quite a bit more complicated than that, isn’t it?

“Of course. We must not misrepresent sustainability as a one-dimensional issue. It’s more complex than it seems. An electric car may seem sustainable, but if the American owner of that car charges it with electricity generated from coal, then the car won’t be any more sustainable over its entire service life than a gas-powered one. Or if a multinational constructs a building with a high energy-efficiency rating right next to a freeway, making it inaccessible by public transportation.”

“That’s why you have to approach sustainability holistically, otherwise you’re just flying blind and you might even end up having a negative impact. The worst that can happen is that we look back in ten years and realize we haven’t achieved anything sustainability-wise and that we’ve also failed financially. That’s why research and integrative thinking are so crucial.”

Robeco was one of the first to offer SDG products. Is that an example of market leadership and innovation?

“That’s definitely an example, but I think we are also a leader when it comes to integration. Many clients are quite advanced in sustainability, but the actual integration is hard for them. You need good research and your portfolio managers and analysts have to accept that companies need to be viewed in a different way. Since we have that expertise, it’s easier for us to innovate in other ways, too. That creates a multiplier effect. It starts with the specialists, but eventually everyone goes that extra mile, leading to a lot more innovation.” 

“We now have around 60 clients with specific sustainability requirements, compared to last year’s figure of about 15. Demand is increasing, but so is our ability to provide solutions. The SDGs are a good example of this: RobecoSAM had both the idea and the expertise to develop a framework enabling analysts to assess companies based on SDG criteria. Ultimately, the SDGs are also part of ESG integration. That takes time and can’t simply be copied. Buying some sustainability data and applying it to your portfolio is not the same as ESG integration.”

These days, almost all asset managers claim that ESG is part of their DNA. Do you ever feel like it’s nothing more than a marketing pitch?

“Quite often, yes. There are also asset managers who do it well. We really do a lot – just look at how many stewardship codes we’ve signed and initiatives we participate in and how often we take the lead in engagement and vote at shareholder meetings. While many parties are only just getting started. It’s great to see that other asset managers are now also getting involved. We’ll have a bigger impact if everyone contributes. But you still want to stand out from the competition. The asset managers who really believe in sustainability will be the winners, because they will be in it for the right reasons. And, in the end, that will make all the difference.”

This interview was first published in Sustainability Inside


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