Robeco has a unique sustainability culture that goes back to the 1990s – and today it has never been more important to us.
Together with our sister company RobecoSAM, we were one of the first asset managers to see the potential of sustainability to enhance the returns of clients’ portfolios. And with this same aim in mind, today we integrate ESG information across our range of investment processes and actively engage with the companies in our portfolios.
Why is sustainability so important to us? We see it as a long-term force that is driving change in markets, countries and companies – which of course also means it can have a major impact on investment returns. So, it makes sense to treat sustainability like other return drivers, such as a company’s financials or market momentum, in our investment processes.
At the bedrock of our approach lies our company’s founding principle – that every investment strategy should be research-driven. This still holds true today: all of our actions linked to sustainability are grounded in exhaustive research.
Over the past quarter of a century, we have adapted and improved our methods and strategies in the face of changing markets and the evolving needs and expectations of our clients. This is reflected in our high score from the United Nations Principles for Responsible Investing (PRI), to which we have been a signatory since it was founded in 2006.
An important element of our sustainability culture is our active ownership approach, which dates back to 2004. Every year, a dedicated team of Robeco engagement specialists is in active dialogue with around 200 companies and 70 private equity managers, discussing financially material themes that we identify in consultation with our investors.
Our approach covers environmental, social and governance (ESG) topics. Our engagements are a highly effective way of influencing behavior and practices, particularly once companies realize it is in their own interests to improve. Better ESG performance can translate into lower costs and better risk management, which feeds right through to the bottom line. Megatrends such as climate change and cybersecurity are prominent themes in our engagement program.
We can only run sustainability strategies properly if we have access to all-encompassing, trustworthy data on sustainability practices. Fortunately, we are in a privileged position as we have at our disposal the unique proprietary sustainability databases compiled by RobecoSAM over many years.
The Corporate Sustainability Assessment (CSA) is an annual evaluation of companies’ sustainability practices that has been carried out since 1999. The CSA analyzes sustainability in much more depth than frameworks based on public disclosure alone. Each year, over 4,500 listed companies around the world are asked between 80-120 industry-specific questions.
The Country Sustainability Ranking (CSR) reflects the ESG performance and credentials of 65 countries and is based on a comprehensive biannual survey. By focusing on long-term factors such as aging, competitiveness and environmental risks, the CSR highlights countries’ strengths and weaknesses that are not typically covered by rating agencies.
In tandem with this, we have significantly improved our corporate ESG scoring process over time. Our Smart ESG methodology uses the wealth of sustainability data in our proprietary databases to assign each firm a Smart ESG score that corrects for potential biases arising from differences in a company’s size, region of listing or industry sector.
Of course, not all companies are the same – ESG factors considerably vary among industries. For example, there is little point in assessing the CO2 emissions, water use or paper consumption of banks, as there is no link between these environmental factors and the banks’ long-term business models.
Instead, it is much more useful to analyze banks’ corporate governance, risk management processes and cybersecurity measures. For a utility or energy company, however, CO2 emissions are extremely important indicators, as they can have a major impact both on their long-term business models and society at large.
At Robeco and RobecoSAM, we integrate ESG criteria across our range of strategies – often at several stages of the investment process – and tailor how we do so according to the characteristics of each asset class. We have been implementing ESG criteria in both the country and company analysis we use for our fundamental equities processes since 2001.
A portfolio construction algorithm ensures that all of our quantitative equities portfolios have a total weighted RobecoSAM sustainability score that is at least as high as their reference index. The upshot of our process is that stocks with higher sustainability scores are more likely to be selected for inclusion in our quantitative equity portfolios than those with low scores.
In effect, this means that the strategies positively screen stocks. This is in contrast to an exclusion policy, which remains the most commonly used method of integrating sustainability criteria among quantitative investors, and only facilitates negative screening.
So, sustainability is no mere box-ticking exercise for us – it has a significant impact on our investment decisions. For example, ESG matters affect our fundamental view of 35% of the companies we analyze in our credit processes. And in our global equity portfolios, ESG typically accounts for 7% of the target prices of the companies in our universe.
For other asset classes, we have been incorporating sustainability principles into how we run our private equity strategies since 2004. We integrate ESG analysis in our due diligence process and in the post-investment, monitoring stage. We monitor the ESG activities of private equity managers we invest with, and assess their progress on ESG integration on an annual basis.
Assessment results serve as input for our ESG engagement program, through which we encourage private equity managers to integrate ESG considerations in their investment process and report on their ESG results. In 2015, in 2015 we introduced a more reactive engagement with private equity managers based on ESG incidents that take place in their portfolio companies. We use RepRisk, a media-search tool specializing in ESG news, as input for our analysis of incidents, and for the dialogue with the affected private equity managers.
Robeco and RobecoSAM also aim to help improve society and the environment by developing and running high-quality impact investing strategies. These solutions range from CO2 footprint reduction strategies and investing in companies that have a positive impact on the UN’s Sustainable Development Goals, to more niche offerings.
Finally, portfolio decarbonization – measuring a fund’s carbon footprint and reducing it by selling the biggest contributors – is a common way to reduce climate change risks in portfolios. But the successful creation of a lower-carbon society involves not just divesting from firms such as high-carbon utilities. It means also investing in many positive developments – such as more efficient buildings, renewables and other aspects – that will help limit global warming.
The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).
This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.
This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.