united kingdomen
Sustainable investing on the rise in Asia

Sustainable investing on the rise in Asia

12-10-2017 | Column

In the past weeks I have visited many Asian institutional investors to talk about sustainable investing. I was positively surprised by the amount of genuine interest in the topic. There was considerable appetite for knowledge sharing and most investors informed us they were starting the process of implementing sustainability in their investment portfolios.

  • Masja Zandbergen - Albers
    Masja
    Zandbergen - Albers
    Head of sustainability integration

Their success in achieving this will depend on the extent to which the many parties active in the field of sustainability offer sufficient research on local companies and whether the right investment solutions exist. In both cases a more Asia-oriented approach is needed. Furthermore, it struck me how important the human element is and that those investors who are genuinely interested in and committed to the topic will be the most successful in achieving change.

Stay informed on Sustainable Investing with monthly mail updates
Stay informed on Sustainable Investing with monthly mail updates
Subscribe

Sustainable investing on the rise in Japan

Japan is a country where sustainable investing seems to be really picking up. The two days I was there were completely packed with meetings. The clear momentum in this country is being driven by the introduction of the corporate governance and stewardship codes and by the fact that large institutions are taking the lead and committing parts of their portfolio to responsible investing. Some are more vocal about it than others. I met with one large pension fund that has actually been investing in a best-in-class ESG portfolio for many years, but has not really communicated this to the outside world. As humility is wisdom in Japan, most investors emphasize that they are still in the early stages and are still learning about sustainable investing. Let’s hope this will lead to action in the future.

Large institutional investors are taking small steps

In other Asian countries I met with some larger institutional investors who seem to be taking smaller steps. They are developing ESG questionnaires to use in their selection process to assess managers’ sustainable investing strengths. Having a sound ESG policy and practices is already a prerequisite for asset managers working with Northern European clients, but I believe it will soon be a prerequisite globally. We shared with them our belief in the importance of a thorough assessment of a manager’s ESG practices. It is no longer enough to be a UNPRI signatory, implicitly take ESG into account, or occasionally engage with the companies in your portfolio. How you implement the UN principles, how you structurally take ESG into account, and engage with companies and keep track of results, are what it’s all about.

These institutions are also working on implementing ESG integration in their own (local) portfolios, but they face many hurdles. These include building up knowledge and investing in teams, low coverage of local small and midcap companies by ESG research providers, deciding which providers to use for voting and how to effectively set up engagement with companies and collaborate with other investors. Sharing our knowledge with them will speed up the process and help investor engagement across the globe.

Moving from A(lpha) to B(elief)

On the private and retail banking side there is a clear need to show clients the alpha potential of an ESG strategy and to develop products customers can relate to. Even though research shows that private investor demand for sustainable investment solutions is increasing, this was not the general feeling I got from the banks I met. There is demand from ultra-high net worth clients and this will be fulfilled, but it is still a challenge to provide solutions for high net worth clients and others. I am afraid hiding behind the alpha search argument is going to hold back developments. It is much more effective to have a clear vision and to believe in the importance of ESG for investors and society alike. I am sure those that do will be successful in both of the major aspects (wealth and well-being).

The meetings I enjoyed most were those attended by top management and the people actually responsible for implementing ESG in portfolios. Both top management and the ESG specialists were highly motivated and of course there were questions on alpha creation, but it seemed as if this station had already been passed. Those present were very engaged and asked relevant questions on the implementation of voting, engagement, quantitative ESG research, manager selection etc. It reinforced my opinion that building human (intellectual) capital is extremely important in furthering ESG efforts in our industry. It all comes down to the people.

Carbon footprint of the trip

Flying to five countries in Asia probably did not contribute to a better environment, which is actually one of the reasons I went. So that is a bit of a contradiction. At Robeco, we are aware that even though direct CO2 emissions are not a major aspect of our company’s business, traveling can still have a significant impact. So this is why we try to reduce our carbon footprint and compensate the remainder. Robeco has signed a declaration stating that we aim to reduce the CO2 emissions resulting from the activities of every one of its employees. Robeco has achieved CarbonNeutral® certification by reducing CO2 emissions to net zero in accordance with The CarbonNeutral Protocol.

This is our monthly column on sustainable investing by Head of ESG integration Masja Zandbergen.

Disclaimer

Please read this important information before proceeding further. It contains legal and regulatory notices relevant to the information contained on this website.

The information contained in the Website is NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws. The value of the investments may fluctuate. Past performance is no guarantee of future results. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. 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.

In the UK, Robeco Institutional Asset Management B.V. (“ROBECO”) only markets its funds to institutional clients and professional investors. Private investors seeking information about ROBECO should visit our corporate website www.robeco.com or contact their financial adviser. ROBECO will not be liable for any damages or losses suffered by private investors accessing these areas.

In the UK, ROBECO Funds has marketing approval for the funds listed on this website, all of which are UCITS funds. ROBECO is authorized by the AFM and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.

Many of the protections provided by the United Kingdom regulatory framework may not apply to investments in ROBECO Funds, including access to the Financial Services Compensation Scheme and the Financial Ombudsman Service. No representation, warranty or undertaking is given as to the accuracy or completeness of the information on this website.

If you are not an institutional client or professional investor you should therefore not proceed. By proceeding please note that we will be treating you as a professional client for regulatory purposes and you agree to be bound by our terms and conditions.

If you do not accept these terms and conditions, as well as the terms of use of the website, please do not continue to use or access any pages on this website.

I Disagree