singaporeen
Three trends behind thematic environmental investing

Three trends behind thematic environmental investing

26-11-2018 | Insight

Three structural trends are driving investment that benefits the environment, says thematic investor Rainer Baumann.

  • Rainer Baumann
    Rainer
    Baumann
    Managing Director

Speed read

  • Millennials will have greater influence on SI than baby boomers
  • Regulation and innovation is transforming traditional industries
  • Auto makers are a good example of how trends can be tapped

Demographic changes in society combined with greater regulation and digitalization are driving sustainability investing onwards, allowing the creation of thematic funds that can capitalize on long-term structural shifts.

It is being led by the gradual dying out of the post-war generation known as the baby boomers, who are now in their 60s and 70s, and their replacement with the generation of millennials born since the mid-1980s who have a far greater interest in sustainability than their parents or grandparents.

“The first major trend is the replacement of baby boomers with millennials who are becoming more and more influential in taking investment decisions,” says Baumann, Head of Investment Management at RobecoSAM.

Robeco Singapore Private Limited

12 Marina View 
#10-02, Asia Square Tower 2 
Singapore 018961 
Email: robecosg@robeco.com
Tel: +65 6909 6898

Contact

Different attitude

“We know from various studies that millennials will take a completely different attitude towards investment, as they also do in terms of how they behave and how they consume. They have a higher sense of responsibility, and will also take environmental issues more into consideration than previous generations. So, changing consumer habits is definitely one driving force.”

“The second trend is regulation – we see encouraging signs that it is moving in the right direction, and is driving more concrete rules that is supporting the wider adoption of environmental, social and governance factors (ESG) in investment and society.”

“But perhaps the most interesting trend is the fast acceleration of innovation, particularly in digitalization – we see a huge transformation of many traditional business models. That might be scary for certain traditional industries, but this change and transformation is also a huge opportunity for new businesses.”

“And that in a nutshell is currently what makes thematic investing so exciting – this combination of a huge technological shift with tightening regulation and changing consumer habits.”

The new auto industry

Baumann says the automotive industry is a good example of how all three trends apply, as consumers demand more environmentally friendly cars, while regulation progressively tightens emissions standards and innovation makes cars more efficient.

“One sector that is going through a fundamental shift is the automotive industry, and the electrification of that sector; I guess we’ll see more innovation there in the next few years than we’ve seen over the past 30-40 years,” he told a recent Responsible Investor conference.

“We now have one million cars being sold this year that are either electric or hybrid, and we expect these numbers to grow to 8-9 million by 2020. And then it really kicks in by 2030-2040, when we will reach the point where more electric cars will be sold than those with traditional combustion engines.”

“So, there is a transformational shift that has created a completely new market for investment. That is something that at RobecoSAM we currently look very closely at; we look at how we can benefit from that by building portfolios that invest in the new value chain that is starting to come up.”

“Besides the car makers, there is of course a huge industry in the car supply chain, which is changing from the traditional industry to new applications in things such as car lighting systems. The next big step will be in radar technology that is essential in distance or speed monitoring. This ultimately is the technology that will allow cars to drive themselves.”

Oil is yesterday’s news

Meanwhile, the higher oil price seen in recent months makes petrol-driven cars more expensive run – aiding the sustainability cause – but that dynamic is becoming irrelevant, Baumann says.

“A rising oil price is always an indication of a strong economic growth, but generally I would say we are becoming more and more independent of the oil price, so it really doesn’t matter that much anymore,” he says.

“In the mobility area, for example, we are moving from combustion engines to electric vehicles, and we have seen development in building technologies where we’re moving away from fossil fuel systems to electricity-based systems.”

“What will become increasingly important will not be the oil price, but the electricity price. There we see the price remaining relatively low and stable, because we have an increasing supply of electricity from clean and alternative sources, and that keeps this transition ongoing.”

Baumann says investors should also not forget how the most basic or traditional of industries can still become attractive thematic investments from their innovation potential.

“We have a thematic investment strategy in the water space; this is considered to be a mature theme, but there is a lot of innovation going on, particularly in emerging markets, which gives our portfolios a lot of investment opportunities, and as a result, great returns,” he says.

Contributing to the SDGs

And one trend that is growing in importance is investing in companies that can contribute to the United Nations’ Sustainable Development Goals. Introduced in 2015, the 17 goals range from eradicating world hunger and reducing global warming, to improving health care, technological access and educational standards in emerging markets.

It has led to the creation of the RobecoSAM Global SDG Credits fund targeting the bonds of companies whose products or services help to achieve the goals. A scoring system is used to find both positive and negative contributions which can be used elsewhere within both RobecoSAM and Robeco.

“We use a framework of the SDGs to report on the environmental benefit of our investments, and have made quite a substantial effort to map about 3,000 companies,” he says. “This framework is now being applied to our strategies to give a better insight into how these investments relate to SDGs – which ones have positive or negative impacts that need to be taken into account.”

“The second step is defining a framework of clear KPIs that are quantifiable over time in what a company really achieves in terms of water saved or emissions saved. It is quite a sophisticated exercise because all companies are different, operating in different markets, but we’ve put a lot of effort into it so that we can make clear assessments on the impact of these companies.”

Important information

This information is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation.
The contents of this document have not been reviewed by the Monetary Authority of Singapore (“MAS”). Robeco Singapore Private Limited holds a capital markets services license for fund management issued by the MAS and is subject to certain clientele restrictions under such license.
An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.

Logo

Important Information

Warning/Important note: This website contains information which is only available to qualified investors as defined below. If you are not a qualified investor, please click “I Disagree” to leave the website.

By clicking on "I agree", I declare that: 

  • I am a qualified investor as defined under 1
  • I have read and understood the Terms and Conditions and Disclaimers as described under 2

1 - This website may only be accessed directly or indirectly by the following persons in Singapore:

1) “institutional investor” under section 304 of the Securities and Futures Act (Cap.289)(“SFA”), which means:
(i) the Government; (ii) a statutory board as may be prescribed by regulations made under section 341 of the SFA; (iii) an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country and whose principal activity is (A) to manage its own funds; (B) to manage the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or (C) to manage the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country; (iv) any entity (A) that is wholly and beneficially owned, whether directly or indirectly, by the central government of a country; and (B) whose funds are managed by an entity mentioned in sub-paragraph (iii); (v) a central bank in a jurisdiction other than Singapore; (vi) a central government in a country other than Singapore; (vii) an agency (of a central government in a country other than Singapore) that is incorporated or established in a country other than Singapore; (viii) a multilateral agency, international organisation or supranational agency as may be prescribed by regulations made under section 341 of the SFA; (ix) a bank that is licensed under the Banking Act (Cap.19); (x) a merchant bank that is approved as a financial institution under section 28 of the Monetary Authority of Singapore Act (Cap.186); (xi) a finance company that is licensed under the Finance Companies Act (Cap.108); (xii) a company or co-operative society that is licensed under the Insurance Act (Cap.142) to carry on insurance business in Singapore; (xiii) a company licensed under the Trust Companies Act (Cap.336); (xiv) a holder of a capital markets services licence; (xv) an approved exchange; (xvi) a recognised market operator; (xvii) an approved clearing house; (xviii) a recognised clearing house; (xix) a licensed trade repository; (xx) a licensed foreign trade repository; (xxi) an approved holding company; (xxii) a Depository as defined in section 81SF of the SFA; (xxiii) an entity or a trust formed or incorporated in a jurisdiction other than Singapore, which is regulated for the carrying on of any financial activity in that jurisdiction by a public authority of that jurisdiction that exercises a function that corresponds to a regulatory function of the Authority under this Act, the Banking Act (Cap.19), the Finance Companies Act (Cap.108), the Monetary Authority of Singapore Act (Cap.186), the Insurance Act (Cap.142), the Trust Companies Act (Cap.336) or such other Act as may be prescribed by regulations made under section 341 of the SFA; (xxiv) a pension fund, or collective investment scheme, whether constituted in Singapore or elsewhere; (xxv) a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or expert investors; (xxvi) the trustee of such trust as the Authority may prescribe, when acting in that capacity; or; (xxvii) such other person as the Authority may prescribe.

2) “relevant person” under section 305(1) of the SFA, which means:
(i) An accredited investor; (ii) a corporation the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; (iii) a trustee of a trust the sole purpose of which is to hold investments and each beneficiary of which is an individual who is an accredited investor; (iv) an officer or equivalent person of the person making the offer (such person being an entity) or a spouse, parent, brother, sister, son or daughter of that officer or equivalent person; or (v) a spouse, parent, brother, sister, son or daughter of the person making the offer (such person being an individual).

3) any person who acquires the units [in a collective investment scheme] as principal if the offer is on terms that the units may only be required at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of units in a collective investment scheme, securities, securities-based derivatives contracts or other assets, and if the following condition is satisfied: (i) the offer is not accompanied by an advertisement making an offer or calling attention to the offer or intended offer; (ii) no selling or promotional expenses are paid or incurred in connection with the offer other than those incurred for administrative or professional services, or by way of commission or fee for services rendered by any of the persons specified in section 302B(1)(d)(i) to (vi) of the SFA; and (iii) no prospectus in respect of the offer has been registered by the Authority or, where a prospectus has been registered (A) the prospectus has eAccxpired pursuant to section 299 of the SFA; or (B) the person making the offer has before making the offer 1. informed the Authority by notice in writing of its intent to make the offer in reliance on the exemption under this subsection; and 2. taken reasonable steps to inform in writing the person to whom the offer is made that the offer is made in reliance on the exemption under this subsection.

4) Or otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

If you are not any of the types of persons described above, you are not authorized to enter this website and you should leave this website immediately.

2 Terms and Conditions
You acknowledge that you have read these Terms and Conditions (“Terms”) prior to accessing the website located at www.robeco.com/sg (“Website”) and you agree to be bound by the Terms.  If you do not agree to all of the Terms, you are not an authorised user and you should not use the Website. The Website is owned by Robeco Singapore Private Limited (company registration number: UEN. 201541306Z), which is licensed by the Monetary Authority of Singapore (“MAS”) pursuant to the Securities and Futures Act (Cap.289) (“SFA”) of Singapore, and is managed by Robeco Singapore Private Limited and/or its affiliates (collectively, as “Robeco”). The Website is intended for and should be accessed by institutional investors or accredited investors (as defined under Section 4A of the SFA) of Singapore.  The Website is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the Robeco to any registration or licensing requirement within such jurisdiction.  It is your responsibility to observe all applicable laws, rules and regulations of any relevant jurisdiction. The content contained in the Website is owned by Robeco and/or its information providers and is protected by applicable copyrights, trademarks, service marks, and/or other intellectual property rights.  You may not copy, distribute, modify, post, frame or link the Website, including any text, graphics, video, audio, software code, user interface, design or logos.  You may not distribute, modify, transmit, reuse, repost, or use the content of the Website for public or commercial use, including all text, images, audio and/or video.  Robeco may terminate your access to the Website for any reason, without prior notice. Neither Robeco, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from the access of the Website.  You agree to indemnity and hold Robeco, its associates, directors, officers or employees harmless against any and all claims, losses, liability, costs and expenses arising from your use of the Website due to violation of the Terms. Robeco reserves the right to change, modify, add or remove any parts of the Terms at any time and for any reason.  The Terms shall deemed to be effective immediately upon posting. The Terms shall be governed by, and shall be construed in accordance with, the law of Singapore.

Disclaimers
The Website has not been reviewed by the MAS. Accordingly, the Website may not be accessed directly or indirectly to persons in Singapore other than (i) to an institutional investor under Section 304 of the SFA, (ii) to a relevant person pursuant to Section 305(1), or any person pursuant to Section 305(2), and in accordance with the conditions specified in Section 305, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. 

Nothing in the Website constitutes tax, accounting, regulatory, legal or investment advice.  The Website is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation or for the purpose of soliciting any action in relation to Robeco’s businesses, or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such an offer and solicitation. Any reproduction or distribution of information from the Website, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited.  By accessing to the Website, you agree to the foregoing.  

The funds referred to in the Website are for information only.  It is not a recommendation or investment advice, nor does it mean the funds is suitable for all investors.  The contents of the website is not reviewed by the MAS.  Any decision to participate in the funds should be made only after reviewing the sections regarding investment considerations, conflicts of interest, risk factors and the relevant Singapore selling restrictions.  You should consult your professional adviser if you are in doubt about the stringent restrictions applicable to the use of the Website, regulatory status of the funds, applicable regulatory protection, associated risks and suitability of the funds to your objectives.

Any decisions made based on the information contained in the Website are the sole responsibility of yours.  Any investments made or to be made shall be with your independent analyses based on your financial situation and objectives.  The investments and strategies contained in the Website may not be suitable for all investors and are not guaranteed by Robeco.  

Investment involves risks and may lose value.  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.  The Website may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies and such projection or forecast is not indicative of the future.  The information contained in the Website, including any data, projections and underlying assumptions are based upon certain assumptions, management forecasts and analysis of information available on an “as is” basis and without warranties of any kind, whether express or implied, and reflects prevailing conditions and Robeco’s views as of the date published or indicated, and maybe superseded by subsequent events or for other reasons.  The information contained in the Website are accordingly subject to change at any time without notice and Robeco are under no obligation to notify you of any of these changes.  Robeco expressly disclaims all liability for errors and omissions in the information presented in the Website and for the use or interpretation by others of information contained in the Website.

Robeco Singapore Private Limited holds a capital markets services licence for fund management issued by the MAS and is subject to certain clientele restrictions under such licence.  An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.

I Disagree