This article is based on our event 'From niche to mainstream' in Amsterdam on 25 June 25 2019, moderated by San Lie.
It's all interconnected
Jacco Minnaar, Chair of the Management Board of Triodos Investment Management: "Triodos IM today stewards EUR 4.2 billion in impact assets with an ever-growing portfolio, both retail and institutional. We don't have a special team for sustainability, it's embodied in our whole organization and in everything we do, because we see impact, risk and return as inseparable from each other."
Sustainable investing is all about understanding the interconnectedness of the world in which we live, says Erik Breen, Director of Impact Equities and Bonds at Triodos IM: "The World Economic Forum’s Global Risks Report 2019 shows that risks are getting more and more intertwined. Investment institutions need to see the interdependencies and start acting on it."
SDG's are a recipe
Conventional application of ESG scores alone cannot steer capital towards sustainable solutions, says Breen. "The UN Sustainable Development Goals are a great recipe for sustainable change, but they are not a menu; you cannot impact one without affecting another, because they are all so interconnected. That's why we invest in seven transition themes for our listed equities and bond funds."
Bottom up positive selection
Triodos IM does not track an index. We believe that proper impact investing requires a holistic vision for sustainable transition, and this vision should not be constrained to the constituents of a benchmark. "A best-in-class approach is not good enough because it still includes for example oil and tobacco companies", says Hans Stegeman, Head of Investment Analysis and Economics at Triodos IM. " We only invest in companies that contribute to positive change through their products, services and business operating models.
Stewardship requires commitment
Ruth van de Belt, Fund Manager of the Triodos Impact Mixed Fund range, explains how Triodos IM applies the principles of impact investing to the listed market. "First and foremost, companies need to fit in one of our seven transition themes. This is positive inclusion. Second, we then screen companies to confirm their alignment with our strict minimum sustainability criteria. Third, we assess their financial position by integrating material sustainability indicators into our fundamental valuation model. We embed active stewardship into each of these steps. This enables us to drive positive change within organizations while also gaining a research edge. This integrated approach is labour-intensive but allows us to make a real difference."
Paul Tang, Economist and Member of European Parliament and Linda van Goor, Independent advisor at Regulatory Communication, underscored that the sustainable investment market will continue to develop thanks to the recently launched EU taxonomy and upcoming legislation. "Investment institutions need to start informing investors in a more systematic and comparable way about the impact of their investments. The experts’ advice regarding the EU Taxonomy for sustainable activities, a list of activities that investment experts regard environmentally sustainable, was published last week."
Nordic Swan Ecolabel
"As of today, 26 funds from 14 different asset managers carry our label, including six Triodos IM funds", says Per Sandell, Head of Sustainable Financial Services at Nordic Ecolabeling. "Our role as a labelling institution is to find the balance between consumer expectations and the critical sustaina-bility work that needs to be done. For love we have Tinder, for sustainability we have the Nordic Swan Label." Per presented Ruth van de Belt and Jacco Minnaar the Ecolabel certificates for two new Triodos IM profile funds.
Integrating sustainability into mainstream portfolios
Vincent Triesschijn, Director Sustainable Investment at ABN AMRO, shares ABN AMRO’s journey into sustainable investing. "In 2018, we made sustainable investing the new default standard for our clients. We realized we needed to shift our portfolio toward sustainable outcomes. Our goal is to have EUR 16 billion in sustainable assets under management by 2020. Currently we have EUR 14 billion. Our experience is that sustainable investing is about asking our clients the right questions. For example, in our client suitability assessment, our advisors ask questions such as ‘what do you think about child labour?’ to start the right discussion. This results in the majority of our clients wanting to invest sustainably."
Trees are the solution
Fact: climate change is caused by humans, says climate expert and meteorologist Reinier van den Berg. "Global warming is on pace to surpass the 1.5 degree Paris-agreement, and even increase more than 2 degrees by the end of 2060."
"We can turn the tide by planting new forests – if we do so fast and on a huge scale. Trees sequester CO2 from the atmosphere and can enable global temperature reductions. Other ways to reduce global warming are to invest in projects that enable and improve energy efficiency, contribute to the clean energy transition, reduce waste, and enable increased recycling. My call to you is, inspire at least two people you know to participate in this change."
Jacco Minnaar offers a metaphor to close the session. “In any university or business school, investing 101 is your introductory level course. It sets the fundamentals of what it means to be an investor and how to effectively meet your financial goals. The Nordic Swan Ecolabel product category for investment funds is product group number 101. Triodos IM believes that Investing 101 should start with impact. This should be a fundamental shift in the way we allocate capital as an industry.”
Visit our Impact report 2018 and find out how impact investing through equities and bonds made a difference in 2018.