Triodos IM is encountering increasing competition from asset managers who have also decided to steer a sustainable course. It is important, though, to distinguish the genuinely sustainable players from the less sustainable investors, says Jacco Minnaar. “I am, however, confident that investors are capable of this - that they can tell what is grey, what is light green and what is really dark green. Our investors are the best measure for determining that we are still on the right track and are among the leaders.” 

Minnaar notes that particularly specialised asset managers are shifting their focus to sustainability. “The large players rely mainly on their scale. That is the basis for their growth. On the other hand, we also see a strong expansion at specialised investors. Pure impact investors such as Triodos IM, for instance. Minnaar believes that the players in the middle are struggling. In that segment you see players who are taking an interest in sustainability mainly because this segment is growing faster than the market and a sustainable approach justifies a higher management fee, he says. “It is not uncommon for managers to continue as before but rename their strategy as sustainable. This is actually greenwashing or impact washing.” 

Minnaar has no wish to expose ‘impact washers’ by mentioning them by name. “That is not our duty. We do however tell investors that a lot of what is being offered is not really sustainable and that they must therefore be aware of what they are investing in. That they must, for instance, take a good look at the stocks that asset managers are actually buying. We come across funds that may have a sustainable label, but nevertheless invest 70% of their assets in fossil fuels.” 

Ahead of the sustainable pack 

Minnaar believes that the strong growth in assets under management for the sustainable funds, proves that Triodos IM is on the right path and is still a frontrunner. Last year Triodos Investment Management's assets under management grew from EUR 4.2 billion to EUR 4.9 billion. “This year we also expect to see growth, despite the challenging conditions.” 

Triodos IM distinguishes itself not only by its dark green style, but also by its investment approach, says Minnaar. “Every impact strategy is managed by a team of experts who maintain long-term relationships with the companies that we invest in.  But even before an investment is made, they will have conducted an intensive and direct dialogue with these companies in order to determine whether they meet our strict minimum requirements. We ask after their intentions and the risk-return ratios of their impact strategies and assess their chances of success. We pursue a pure impact strategy based on three themes: the energy and climate transition, the transition to a sustainable food and agricultural system, and social and financial inclusion. Our investment teams are very experienced and highly motivated, we use our own data and conduct an ongoing dialogue with companies.” 

We measure the impact for each separate theme. Minnaar: “When assessing a sustainable energy fund, we will for instance look at the CO2 emissions or, rather, the amount of CO2 emissions that are avoided by investing in sustainable alternatives to fossil energy. All our funds must, however, also comply with our minimum ESG requirements. For wind farms we not only look at the sustainable power they produce, but also consider biodiversity and the impact that the wind turbines have on bird life, for instance.” 

Minnaar expects that the market for impact investing will continue to register solid growth, partly because of the new EU regulations, which require asset managers to publish the impact of their investments as from next year. The regulations will also set out when a product may be labelled as sustainable. Minnaar believes that Triodos IM will enjoy significant growth. “Which is in fact essential, if we are to provide large investors and pension funds with access to impact strategies.”

A pioneering role

Triodos IM is also realising growth through the introduction of new themes that are aligned with global challenges. “We make such themes investable and understand how investors can benefit from these opportunities. That entails an element of investment risk. But we have shown that we can also turn investing based on new themes into a financial success. In the past you would then find that other asset managers who initially found these themes too risky or too new, would ultimately also introduce a strategy based on those themes. Wind energy or the green funds that have become a well-known phenomenon, are cases in point.”

Minnaar welcomes this competition. “We welcome the shift towards impact and sustainability that is clearly taking place in the financial sector. Minnaar believes that it will be some time yet before a significant number of other parties will be able to match Triodos IM's dark green colour. “I do believe in a future where impact investing will be mainstream, but it will take a long time before a significant number of other parties can and will do what Triodos IM is doing. Moreover, we keep finding new themes that we really need to address if we are to make the world more sustainable. Biodiversity, for instance, is an issue that we do already invest in, but so far only on a limited scale, within the limits of existing funds or through funds with limited accessibility. We are working at making this a solid investment proposition. That takes time, but it will happen; it is what investors are asking for.”