Robeco is emphasising greater accessibility in its recent initiatives. In September 2023, the Dutch fund house signalled its entry into exchange-traded funds (ETFs). This move was underscored by the appointment of Nick King, formerly head of ETFs at Fidelity International for eight years.
Less than a week later, Robeco announced an update to its SI Open Access Initiative in Tokyo, sharing its wealth of sustainable investing (SI) data with companies, non-governmental organisations and the public.
Robeco first shared this data in August 2022 with “over 900 clients and academics” who access its proprietary scoring of countries and corporates.
As a microcosm of the asset manager’s long-term strategy, the two announcements reveal the key focus areas of Robeco’s chief executive, Karin van Baardwijk.
“For us, sustainable investing is not a marketing outing. It’s true to our DNA, connected to research and 25 years of experience,” she says in an exclusive interview with The Edge Singapore.
Based in Rotterdam, Van Baardwijk visited Singapore in November 2023 at the end of a whirlwind tour through Tokyo, Beijing and South Korea.
See also: MSCI boss warns of climate risks
In 2023, she visited Robeco’s offices in Europe, the Middle East and Asia — as part of “catch-up travel” after rising to the top job in January 2022.
“I’ve held many different roles in the organisation,” says Van Baardwijk, who joined Robeco in 2006. “I’ve never been an investment management professional, but that’s, I think, almost the only role I did not have. I went from risk management to technology to operations; I’ve been deputy CEO and now CEO. So, I’ve seen various parts of the organisation.”
Van Baardwijk holds a Master’s in Business Economics and Corporate Law from the University of Utrecht. Her summit to the top spot during the pandemic was “not the easiest of times”.
See also: CapitaLand Investment closes new KRW200 billion value-add office fund
“If I look back, I’m very happy and grateful that I’ve been given the CEO role in the company that I already know for so long because in the whole context of the world changing, [if] you need to figure out a new company and a new seat, that can be very difficult. I was really happy to be able to take on the seat in a company that I know well.”
Ranking corporates and countries
Van Baardwijk is aware of the market’s confusion over environmental, social and governance (ESG) ratings, echoing the words of MSCI chairman and CEO Henry Fernandez (MSCI boss warns of climate risks, The Edge Singapore issue 1115).
Rather than intensifying the focus on measuring ESG factors, Van Baardwijk uses the United Nations’ Sustainable Development Goals (SDGs).
These goals include ending hunger, achieving gender equality and taking urgent action to halt climate change.
“ESG sometimes is referred to as three letters that won’t move the needle; some say it’s even dangerous,” she says. “I understand the increased criticism of ESG data because it might provide a misleading impression, suggesting that companies with a high ESG score have a very positive impact. From a sustainability perspective, that isn’t always the case; it only says whether ESG factors influence a company’s profitability. So, we prefer to look at the SDGs.”
Robeco’s SDG scores, developed since 2017, complement traditional ESG ratings, offering a more holistic perspective on companies’ sustainability efforts.
For more stories about where money flows, click here for Capital Section
Robeco’s initiative to publicly share corporate SDG scores and country ESG scores via its SI Open Access Initiative shows the firm is “putting our money where our mouth is” on improving data quality, says Van Baardwijk.
Apple, for example, scores +1 on a seven-point scale from –3 to +3. Microsoft scores +2, while Amazon (-1) is marked down on SDG 8, “Decent work and economic growth” and SDG 17, “Partnerships for the goals”.
Meta (–1) shines in areas like gender equality and industry, innovation and infrastructure but is weighed down by SDG 12, “Responsible consumption and production” and SDG 16, “Peace, justice and strong institutions”.
Among Singapore’s banks, Oversea-Chinese Banking Corporation (OCBC) O39 scores the highest with +3, followed by DBS Group D05 at +2 and United Overseas Bank U11 (UOB) with +1.
The lowest scorers among Straits Times Index constituents include Sembcorp Industries U96 (–3), Thai Beverage Y92 (–3), Sats S58 (–2) and Wilmar International F34 (–2).
Across countries, Robeco scores Finland, Sweden and Norway as the top three countries that satisfy their ESG criteria.
At #29, Singapore ranks behind Japan (#22) as the second-highest-placing economy in Asia but ahead of South Korea (#34), Taiwan (#37) and Hong Kong (#42).
When assessing domestic risks, Robeco looks for energy use, human rights and political unrest. “This information is then used as part of the decision-making process for buying government bonds,” says the asset manager.
Robeco says any country’s political and economic stability is set by the government and the system it uses. Hence, the “governance” factor has the highest weighting of 40%.
“Social factors, which are largely a result of the political system used, are given a weighting of 30%, with the remaining 30% for environmental factors. Amid the weightings, 7.5% of the scores are now attributed to biodiversity, human ageing and corruption.”
‘Road to success’ for ETFs
By the end of 2024, Van Baardwijk hopes to have launched Robeco’s first ETF. She says: “ETFs are an important opportunity for us to bring our existing investment capabilities to the market.”
Van Baardwijk adds that ETFs have been “under consideration” at Robeco “for a while” because of their growing popularity and versatility. “What makes it unique, I think, is their liquidity and immediacy advantages over traditional mutual funds. So, we feel there’s a road to success in Europe on active ETFs and we want to be part of that.”
Active ETFs “have been massive” in the US owing to tax benefits, says Van Baardwijk.
Europe offers an advantage in liquidity, she adds. “This is a European initiative for now. Of course, we don’t know the appetite and how it will be picked up, but the aim is to do this on a European level first.”
What the first Robeco ETF will look like is still up in the air. “We’re looking into what the most interesting part is. Our strong quant capabilities is one [and] sustainable solutions [is another], but potentially index solutions, trends and thematics are well-connected to ETF vehicles. We haven’t decided yet [on] what the first launch will be, but that’s the work we’re currently doing. Hopefully, we can conclude on the first ETF to go live soon, so we can work gradually towards the launch in the second half of 2024.”
Robeco predicts a significant shift in the global economic landscape in 2024 as the “Goldilocks era” ends.
The asset manager notes that decreased consumer spending and reduced corporate investment likely indicate a deepening slowdown in the G7 business cycle.
Adaptability and resilience
Against market expectations, the US economy has demonstrated unexpected resilience in 2023, characterised by low unemployment and disinflation, says multi-asset strategist Peter van der Welle.
“Yet, the last mile for central banks will prove the toughest. Further disinflation efforts will come at a higher cost as the trade-off between unemployment and inflation steepens at lower inflation levels.”
The prevailing narrative anticipates a soft landing, where inflation is managed without a substantial increase in unemployment.
Still, Robeco contends that this outlook is overly optimistic. It adds that the US equity market is expensive and earnings growth is overestimated.
“The current consensus 2024 MSCI All Country World Index (ACWI) earnings per share growth forecast at 11.4% is hard to square with our view that G7 economies will largely be stagnant in 2024. After reaching a peak in G7 policy rates, the MSCI ACWI earnings per share typically declines by 2% in the subsequent six months and by almost 10% in the next year.”
Europe and Japan could perform better, with Robeco expressing optimism.
Growth estimates of 3% for European equities’ earnings might be “too pessimistic”, even in a sluggish recovery following a possible mild Eurozone recession in early 2024. This optimism is fueled by buyback activity from cash-rich European companies, providing a supportive floor.
Meanwhile, Robeco says Japan’s equity market is “not expensive” on forward P/E. “The relative performance of Japan versus MSCI ACWI has lagged the weakening yen, reflecting future appreciation of the yen. If USD-JPY stays above 130 into 2024, this could be a tailwind for Japanese exporters.”
Robeco sees a “good entry point” for the emerging market as the US dollar peaks and the flurry of recent stimulus measures in China starts to pay off, providing thrust for the broader emerging market.
It adds that the US dollar’s high valuation may have peaked as the Fed approaches the cutting phase of the cycle. “The dollar-yen pair is interesting due to the yen’s potential to rise.”
Sustainable funds may also have to wait beyond 2024 for a reprieve, with a “significant” tail risk of oil prices remaining elevated for longer despite weakening growth. “In the long term, sustainable investing will likely thrive, driven by regulations, green investment securities and continued societal and investor interest.”
Last year was very volatile, says Van Baardwijk. “We had to deal with many unexpected things, not just in 2023, but it started earlier in 2022.”
Looking ahead, she stands by the values of adaptability and resilience. “Adaptability lies in making sure that we continue to shift along the lines of our client demands and resilience means that you can’t have all your eggs in one basket.”
Even with 16 offices worldwide and some EUR181 billion ($262.8 billion) in assets under management, Van Baardwijk knows Robeco is “not the biggest asset manager”. “What I like about our company [is] we have a very broadly defined book of business.”
In some markets, fixed-income solutions thrive because of the market circumstances today, says Van Baardwijk. “But we also have equity, thematic and SI solutions that, under different circumstances, are flourishing very much. For us, it will always be [about] making sure there’s adaptability and resilience to make the changes relevant to our clients today and live up to client demand.”
