The moves form part of the EU’s Sustainable Finance Action Plan and a key new directive, the Sustainable Finance Disclosure Regulation (SFDR), both of which start to come into effect from March 2021.
The SFDR forces asset managers to disclose the differing levels of sustainability integration and focus of each investment strategy that they offer. This aims to create a more transparent playing field and stop greenwashing by increasing comparability between funds for end investors.
Two defining parts of the regulation affect virtually all funds at Robeco. Article 8 labels all strategies that that promote environmental and social characteristics, and have these factors integrated into the investment process. The higher Article 9 applies to those with specific sustainability targets or objectives. All needed to be labeled according to the relevant Article by 10 March.
In a way, this is business as usual for Robeco. “With 25 years of sustainable investing experience, Robeco has long categorized our range of investment using our own internal classification system,” says Kenneth Robertson, Client Portfolio Manager with the Robeco SI Center of Expertise.
“When preparing for the new requirements specified under SFDR, we have therefore been able to draw on these experiences to ensure our compliance with the new regulations from their 10 March implementation.”
“Our company-wide philosophy is that companies (and countries) that act in a sustainable way towards the environment, society and all its stakeholders are likely to be more able to deal with a variety of issues in the future of their business or endeavours. The vast majority of Robeco strategies therefore systematically integrate ESG into the investment process based on proprietary research.”
“Here, the starting point is a deep understanding of the materiality of sustainability factors, and their impact on a company’s business model and profitability, allowing us a better understanding of the risks and opportunities faced by companies over the long term.”
Robeco’s in-house classification system was launched in 2019 to make it easier for clients to choose just how sustainable they wanted their investments to be. This led to the creation of three types of fund range, labeled as Sustainability Inside, Sustainability Focused, and Impact Investing.
“The majority of Robeco strategies fall into our Sustainability Inside category, which includes full ESG integration based on proprietary research, exclusions, and voting and engagement,” says Robertson. “Our Sustainability Focused strategies have an explicit sustainability policy, and targets for an ESG profile and an environmental footprint that are better than their benchmarks.”
“Our Impact investing strategies aim to contribute to specific sustainable themes, such as the Sustainable Development Goals and our new fixed income climate funds that are aligned with the Paris Agreement benchmark. These funds are labeled as RobecoSAM.”
This neatly mirrors the new SFDR classifications:
A small minority of Robeco funds will fall under the lesser Article 6 classification, in which ESG is not applied, such as those solely using derivatives, or cash savings accounts.
“Even with a long history of sustainable investing, Robeco undertook an extensive classification of our strategies, using the criteria as set out by the new SFDR regulations,” says Elissa Lyra, Senior Product Development Manager at Robeco.
“Our classification process began with the creation of dedicated working groups for each investment capability offered by Robeco, including for fixed income, quant, fundamental equity and multi asset. At this stage, each fund was mapped against the classification requirements as set out by the SFDR.”
“As a second step, using a newly developed in house tooling, we assessed the performance of our fund range against the adverse impact metrics as specified under the regulation. Following these initial steps, Robeco’s Legal, Compliance and Risk teams performed additional assessments to ensure compliance with the spirit and the letter of the new regulations.”
“Finally, this led to a classification proposal that was reviewed by several internal governance committees, and ultimately led to the final classification of our fund range that comes into play on 10 March. New fund disclosures will also be available on our website from that date.”
While the process was complex and involved teams across the whole company, it was made easier by the fact that ESG has routinely been integrated into the investment process since 2010 .
“Given that the vast majority of Robeco strategies systematically integrate ESG into the investment process, in addition to integrated active ownership and exclusions, most Robeco strategies fell quite naturally under Article 8,” says Lyra.
“Binding selection criteria were used for the underlying assets, as well as binding indicators to measure whether the criteria for promoting environmental or social characteristics were met. The assessment of good governance practices among investee companies is also an integrated part of these strategies.”
“Our SI Focused range goes a step further in reducing their environmental footprint versus the benchmark. However, we chose to still classify these strategies as Article 8 funds, given that these strategies are not deemed to be fully pursuing environmental or social objectives, but rather strive for a footprint reduction as a risk mitigation measure.”
“For Article 9, all of our RobecoSAM-labeled strategies follow our state-of-the-art impact approach. They are designed to make a measurable environmental or societal impact, and therefore have a sustainable investment objective at their core, as well as a commitment to do no significant harm to other sustainable objectives. The whole Impact Investing range can therefore be classified as Article 9.”
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.