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Interview: RobecoSAM CEO on ESG’s ‘unprecedented transformation’

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Investors are catching up with corporates in appreciating sustainability as a concept that can help unlock opportunities rather than just mitigate risk, according to the chief executive of RobecoSAM.

Speaking at a Responsible Investor conference in London earlier this month, Aris Prepoudis – who took over as CEO in January – said investors’ approach to sustainability was unfolding in a similar way to how the corporate sector embraced the concept.

Investors’ initial approach to sustainability was to think about it as a risk management tool, Prepoudis said, but on the back of better statistical evidence they have become more aware that deeper integration of sustainability can help identify more innovative business models and better investment opportunities.

The CEO said sustainable investing was undergoing unprecedented transformation. Keeping up intellectually with the “bright minds” of the younger generation entering this field was a challenge.

Speaking to IPE after the conference, Prepoudis said that although the focus among asset owners was still on risk management he was confident more would appreciate the opportunities that came from sustainability investing. 

Quant combination

Demand from asset owners was driving significant change in asset management, Prepoudis said.

In particular, investors are keen on quantitative asset management combined with environmental, social, and governance (ESG) factors. This could involve combining investment performance factors such as momentum, value, or quality, with ESG. HSBC’s UK pension scheme is one of the most notable proponents of this approach, having combined an ESG tilt with equity factor strategies for its primary defined contribution fund launched last year.

With this in mind, Prepoudis would like RobecoSAM to intensify co-operation with its sister company Robeco to combine the latter’s quantitative investing capabilities with RobecoSAM’s ESG research.

The two are already working together on a mandate to manage an “optimised equity index strategy with an ESG approach” for France’s Fonds de réserve pour les retraites. 

“I see enormous momentum in that [quantitative] field from the climate side,” said Prepoudis. “There are more and more clients looking to combine quantitative asset management approaches and deeply integrate ESG research into these concepts.

“You have to have a solid framework for how you combine these two elements in portfolio construction simultaneously.”

This would help convince the large sophisticated asset owners of the benefits of this approach, he said.

Catering for such demand increasingly required having vast analytical capacity to examine copious amounts of data, the CEO explained.

“We have to have people on board who understand how to get at really interesting datasets and have a solid understanding of how these can be transformed into financially material information,” he said.

RobecoSAM is well positioned on this front, but competition is intense.

“Our peers have realised that sustainability has become a really important topic for all the big asset owners and every since a pretty fierce war for talent has started out there in the marketplace,” Prepoudis said.

RobecoSAM had $16.1bn (€15.3bn) of client assets under management, advice and/or license as at the end of December 2016. Together with S&P Dow Jones Indices, it publishes the Dow Jones Sustainability Indices (DJSI) and S&P ESG factor weighted indices. Every year it carries out sustainability analyses of over 3,900 listed companies, which feeds into the DJSI.

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