Investing with an eye for the environment

More and more market parties offer sustainable investment products. A good thing, according to Xander Urbach of the Dutch Association of Investors for Sustainable Development (VBDO). He observes that the sustainable goals and a good return go well together.

The VBDO publishes, among other things, an annual benchmark, in which the sustainability objectives of pension funds and insurers are laid down along the yardstick. This shows that sustainable investing among private investors in the Netherlands has hardly been discovered.

Urbach: “The market for sustainable funds is growing, we hope to publish a new study with recent figures this year. Scientific research shows that sustainable investment portfolios are not inferior to conventional companies and funds. So why not do it? That is my reasoning. ”

Risk profiles

“If you invest sustainably, you will have to deal with the same risk profiles as with ordinary funds. You only contribute to a better world. “In selecting a sustainable fund, he advises looking primarily at the fund managers. As an example, he mentions Robeco’s impact funds. “For example, they calculate their fund with help from the Dow Jones Sustainability Index.”

To assess the sustainability performance of listed companies, the so-called ESG criteria are used. The abbreviation stands for environment (Environment), social issues (Social) and good corporate governance (Governance). A comparison of three hundred of the largest companies by the Boston Consulting Group in 2017 shows that companies that score high on ESG criteria are on average 3.4% more profitable.

Transparency

VBDO will present the annual Benchmark Pension Funds on 11 October. Pension funds are increasingly taking environmental and social criteria into account in their investment analysis and are also becoming increasingly transparent about this, as stated in the 2017 report. The VBDO also has a point of criticism: for many funds, sustainable investment is still too noncommittal. Over half of the pension funds (57%) have not yet set targets for sustainability policy.

Pension funds and insurers are forced to think about their policies. “You see an increase in legislation and regulations,” says Urbach. For example, ‘sustainable finance’ is high on the action list of the European Commission. “A product will have to come in line with EU laws and regulations. This will work stimulating. ”

Leader

Pension funds feel pressure from outside. On the one hand, workers and pensioners want the certainty of a value-based pension. At the same time, there is increasing pressure on the investment policy. Participants expect transparency about the sectors in which the pension fund invests.

“The large pension funds in particular pursue a sustainable policy and include environmental and social criteria in their investment analysis,” Urbach notes. He cites the Pensioenfonds Zorg en Welzijn as an example. “They aim to halve the ‘carbon footprint’ of their investments by 2020. ABP really does work on the Sustainable Development Goals. These are trends that we welcome, “says Urbach.

The Dutch pension sector is a leader in the world, together with the Scandinavian countries. He sees a development in which pension and investment funds increasingly exclude companies and sectors – such as tobacco and coal.

Greenwashing

As with other investment products, a critical look is in order. Urbach emphasizes that you must do your homework well in advance. “Some funds are less sustainable. You have to look critically at what is in the funds. ”

DNB warns against ‘greenwashing’, the risk that green products turn out to be less ‘green’ than is thought or propagated. According to the bank, this can cause reputational damage. “Find out how and by whom the fund is tested.” This can be done via Sustainalytics, which checks funds for ESG criteria. Another party is KnowTheChain.org, which investigates working conditions in production chains.

This article has been published in the Financiële Telegraaf.