After a summer of regional floods and forest fires, followed by COP26 in autumn, now is an opportune time to pause and take stock. The asset management industry has been embracing sustainability en masse, but as with every major shift, change doesn’t happen overnight. Victor Verberk, Robeco’s CIO Fixed Income and Sustainability, talks about seismic shifts, enormous challenges and the extensive media coverage of whistleblowers in the asset management industry.
“Let’s start with a comment I find myself making more and more often: ‘We have no clue what is coming at us.’ Climate management and taking care of biodiversity sound idealistic, but no one really knows what the trajectory to net zero will exactly look like, or what challenges in the decarbonization path we will face in the coming 10 to 15 years. We need more and more reliable data – which will require a huge commitment, both intellectually and financially – to clarify the link between climate impact and asset management. It is crucial that we properly understand the real-world impact of our policies and investments. It’s maybe a bit painful to admit, but at this stage we have to accept that we don’t know the exact route, only the direction. More than ever, we need to trust our people and specialists and keep a close eye on what science tells us.”
“This means we need to invest in more IT resources, more tooling and more SI specialists, and in general we need to adopt a radical change of behavior in our industry. It is no longer just about creating alpha if you want to be leaders of the pack in sustainable investing and meet clients’ needs in the coming decades. Needless to say, every asset manager wants to be part of this major shift and it has become increasingly popular in the industry to over-promise and under-deliver. We prefer to do the opposite.”
“It is also important to realize how fast our industry is developing. Things are happening very quickly. A decade ago, we talked about integrating ESG across the entire investment process rather than having a team of SI specialists in an isolated corner of the company. Now, we are talking about the complexities of carbon data and calculating Scope 3 trajectories towards 2030. We are discussing how to measure the real-world impact of our portfolios. This is a whole new ball game, and one thing is sure: we haven’t seen the end of these changes.”
“Sustainable investing is the big thing in our industry right now. It is where the money is flowing towards. So, no asset managers want to miss out. They all want to profit from this big shift. But unlike most other asset managers, we have embraced sustainability for over 15 years now and have a solid and proven track record in the field. Now, sustainable investing is not a simple copy-paste exercise. We have been in this game for a long time, while some competitors only recently embraced it. It takes a lot of research, building up knowledge, getting the right systems in place and the right people on board. Even as pioneers in this area we are still learning every day.”
“On the other side of the spectrum, some asset managers have simply jumped on the bandwagon without yet having the right specialists and processes in place. It’s a complex thing. There’s IT, there’s research, there’s the data challenge, and then there’s the implementation into the investment processes, over all assets, of all the facts, figures and knowledge you have gathered. For late joiners, it can take years to catch up and, in the meantime, everything keeps changing at an increasing speed. They aren’t perhaps to blame for being behind, but they should be a bit more modest in their sustainability claims.”
“And then you have the passive asset managers, who by their nature have little room to maneuver. I am simplifying here somewhat, but claiming to be sustainable because you offer some sustainable indices as well is probably overstating things a bit.”
“It’s a good thing that regulators and investors are increasingly aware of potential greenwashing – the intentional and the unintentional shades of greenwashing. We need to understand that from a commercial perspective, it is tempting to position yourself as a sustainable player when in fact you have only taken the first steps in the right direction.”
“Organizations, NGOs and governmental bodies refer increasingly to each other and in doing so are creating a coherent set of rules and visions. The Paris Climate Agreement, the UN Sustainable Development Goals (SDG) and Europe’s Green Deal are all interconnected. They are all based on scientific work done in the field. And we see a continued stressing of scientific evidence. Sustainability is not for believers; it has become hard science with a growing number of scientific studies and papers being published on it. As a consequence, the integration of sustainability science into new policies, for example in Europe, is now commonplace.”
“I did a lot of reading during the summer break, also on SDGs. All in all, the world is moving fast from ESG investing to impact. An often raised issue with ESG investing is that some controversial companies, such as tobacco producers, often are credited by index providers with relatively high ESG scores because, for example, they provide jobs or they take care well of their employees. So what you see is a trade-off between plusses and minuses that will give companies an average decent ESG profile, while at the same time they would be excluded for obvious reasons by many big investors.”
“Another major concern among investors regarding ESG integration is that it does not lead to positive real-world impact. And that taking ESG considerations into account does not automatically lead to a portfolio of companies that are associated with a positive real world impact. This means we need a much closer link between the real economy and the financial sector, which is a challenge for indices who need to find a way to move away from abstract scores into real-world impact measured on an absolute basis.”
“The biggest challenge is getting the right data. A fundamental problem of carbon footprint data is that it is backward looking, with an average time lapse of around two years. This means the data won’t tell you about the transition readiness of a company. What we really need is more forward-looking metrics. A carbon footprint as it is now doesn't tell me about whether the company is going to decarbonize in the future. The second problem is not that there isn’t enough data, but that it comes from multiple and overlapping sources that are often contradictory. Scope 1 and 2 data is relatively easy to obtain, but there’s hardly any correlation on the scale of it from the different data providers. The real problem is that it's not measured, it's modelled. That means it's estimated.”
“On the other hand, we shouldn’t hide behind issues surrounding data in order to avoid taking next steps. We should stay committed to the goals to which we’ve said we’re committed. To us, as investors, it is very important to understand how sectors will decarbonize in the next decades. Our SI researchers are developing our own sectoral decarbonization pathway. Key sectors to watch are the known ones: Oil & gas, energy, transport, cement and buildings, iron and steel.”
“Now, if you talk about being Paris-aligned, there are several things we should not forget. First, a portfolio that targets 1.5 degrees by 2050 does not have to fulfil a 1.5 degree limit on global warming. The trajectory is crucial. For example, a slow decarbonization trajectory for the coming decades followed by a steep decarbonization trend thereafter would lead to significant carbon emissions over time. However, a steep decarbonization trajectory in the next few years followed by a much slower one thereafter would result in a much lower cumulative carbon emissions schedule. So, 1.5 degrees and being net zero are not the same.”
“We have identified six key actions, with the aim of decarbonizing our activities, accelerating the transition and promoting climate-aligned investing. If we look at our portfolios, Robeco will follow a trajectory of 7% decarbonization year on year, in order to align our investments with the goals of the Paris Agreement. And then we aim to be net zero in our own operations (buildings, business travels and all other activities) by 2050. Active ownership is our prime tool to also make sure the companies in our portfolios will reduce emissions. But it’s not only us and them. We also call on governments to fulfil their role. We can only achieve the ambitious and necessary climate goals together. That is why we collaborate with both clients, peers and other relevant stakeholders. It takes a joint effort to face the climate challenge.”
“Now here’s a bit of irony: my personal guess is that China, the world’s largest source of carbon emissions, might take the lead in bringing about change. The country is centrally guided, which sometimes can be a benefit, so it might surprise us all.”
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.
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:
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.
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.