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Robeco’s bon viveur on golf, insane fees and ESG

Robeco’s bon viveur on golf, insane fees and ESG

20-03-2020 | Interview
A solitary round of golf at the crack of dawn provides quiet thinking time for Gilbert Van Hassel.
This interview was first published in the Financial Times on 14 March 2020

“I’m not very good but I find it really enjoyable, walking around in nature and hitting a ball,” says the chief executive of Robeco, the $195bn Rotterdam-based group that specialises in quantitative strategies, emerging markets and sustainable investing.

Mr Van Hassel is a veteran who spent 15 years in a variety of jobs at JPMorgan, where he worked as head of fixed income and later as head of operations and technology of the bank’s asset management division. He moved to lead ING’s investment management division in Europe in 2007 before being promoted to global head, when he took a lead role in the complex restructuring of the business in the aftermath of the financial crisis. ING sold its US and Latin American investment units and the upheaval Mr Van Hassel remembers as a highly stressful period.

“It is not an experience that I would want to repeat but you also learn a lot. I would much rather build a business than have to oversee successive divestments,” says the 63-year-old father of three. He then took a career break of almost three years before joining Robeco in 2016. Orix, the Japanese financial services group, bought Robeco in 2013 in a €1.9bn deal. After spending seven years in Asia while at JPMorgan, Mr Van Hassel speaks some Japanese. “Just enough to get me into serious trouble,” he jokes, adding the Robeco deal has been good for Orix. “We have seen record inflows over the past couple of years and valuations for asset management businesses have increased. Orix is very pleased.”

Robeco ranked top of an analysis of global asset managers based on their responsible investment capabilities, which was published this month by ShareAction, the campaigning charity led by Catherine Howarth. “Understanding environmental, social and governance issues helps asset managers to make better risk adjusted decisions,” says Mr Van Hassel.

Capitalism is the best way to make money but it needs to have a social face, says Gilbert Van Hassel

He views Robeco’s expertise in sustainable investing as a way to distinguish itself from competitors as well as a necessary response to the challenges confronting humanity.

“I am not a tree-hugger and Robeco is a commercial organisation. Capitalism is still the best way to create wealth and wellbeing but it needs to have a social face. Climate change, inequality and diversity are leading to social unrest. These are all issues that younger people are forcing us to take more seriously.”

Adoption of sustainable investment strategies has been uneven across the world but Mr Van Hassel says the subject of ESG appears “within the first 15 minutes of every conversation” with clients. But he adds candidly that the academic work about the benefits of integrating ESG into portfolios is “not fully conclusive” due to data limitations and the lack of agreed definitions about sustainability. He believes the narrow definition of fiduciary responsibility imposed on US public pension plans is no longer fit for purpose.

“These large pools of money can only dabble in sustainable investing strategies but we hope that public opinion and plain common sense will lead to change over time. A narrow definition of fiduciary responsibility which requires US pension plans to maximise shortterm returns belongs in the past." Interest in sustainable investing in Asia and the Middle East has lagged behind Europe but is now accelerating. “Australia is far ahead of everybody else in Asia which is still very much a returns first region. There was little interest in ESG in the Middle East until two years ago but the sovereign funds are now starting to buy sustainable products.”

Robeco has identified five new engagement themes for 2020 including combating biodiversity loss, improving mining safety, pursuing decarbonisation, aligning executive remuneration with long-term value creation and promoting better corporate governance in emerging markets. He declines to name any company that Robeco might target but claims that more than half of its engagements so far have met their objectives.

Robeco has already played a role in persuading Shell to set targets for cutting carbon emissions and linking pay awards to top executives to meeting these objectives. It has tackled the oil companies Eni, BP and Equinor about their energy efficiency objectives and pushed for reductions in targets for product emissions. It has also quizzed Mitsui Fudosan, Toshiba and KDDI about corporate governance disclosures and pushed both Hormel Foods and Yum Brands to improve the sustainability of their meat and fish supply chains.

Outside the office, Mr Van Hassel enjoys experimenting with complicated recipes for family guests. “I’m a good hobby cook and a wine lover, particularly burgundy. I also enjoy reading about wine and visiting good restaurants. It’s visible,” he says, patting his belly. Under his leadership, Robeco has exited from fiduciary management and sold its ESG ratings business to S&P Global, the data provider. The latter decision appears at odds with Robeco’s emphasis on ESG but Mr Van Hassel says making the ratings more widely available via S&P will benefit a broader range of investors.

European reforms known as Mifid II, which were introduced in 2018, have improved transparency and disclosure standards for investors while also increasing the cost of doing business for asset managers. Mr Van Hassel’s press minder becomes nervous when her boss tackles this issue in his typically direct fashion during a visit to Robeco’s London office in February. “We need to ensure that asset managers can deliver quality services at the right price. But some of the fees for mandates are basically insane and their quality can no longer be guaranteed. Regulators have to ask themselves whether this is what they really wanted to achieve,” he says.

But fighting a battle over fees with industry heavyweights such as BlackRock and Vanguard holds little appeal. “You need to be in the $1tn club to have the scale to compete on price. We want to compete on the quality of the services we provide. Pricing is an issue in our institutional business but it comes very late in the discussions with clients.” He believes that asset managers are going through a necessary period of “soul searching” after a decade when profits were boosted by huge gains across financial markets.

“Every asset manager is looking at its business because fees are dropping and future investment returns are expected to be lower. How many industries survive for long with high profit margins and very high salaries? “It will settle at a more realistic level than in the past. Robeco will continue to thrive if we continue to focus on our core business. I’m very optimistic, but not for my golf.”

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