INSTITUTE OF MANAGEMENT TECHNOLOGY

GHAZIABAD
Post-Graduate Diploma in Management
(Banking & Financial Services)1

SUSTAINABILITY
AND RESPONSIBLE FINANCE
Group Project (Part-B)

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Table of Contents
Asset Managers and their impact on the Financial System: 3
Role of asset managers in impact investing: 4
Robeco: The investment Engineers 5
Appendix 6
References 7

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 Asset Managers and their impact on the Financial System
The primary function of asset managers is to help investors
manage their savings by offering products and solutions to
transform savings into capital market instruments. They seek
investment opportunities and involvement with the investee
companies to hold companies accountable, including their ESG
performance.
It is a circular process in which asset managers help the economy
directly or indirectly by channeling the funds or funding sources
into new investment projects, eventually providing liquidity to
the markets. This mechanism generates returns to the clients
snapshot from the EFAMA report Nov 2020 involved in the process, considering their specific risk appetite
and investment horizon. This caters to the creation of jobs that
support the growth of a strong economy. Adding to these roles and responsibilities, by
purchasing and selling assets, asset managers also play a crucial role in smoothening of
operations of financial markets. Another function that asset managers play is to help
governments in pooling funds. As asset managers work on behalf of their clients, they
eventually became the most prominent investors in government bonds.

The below flowchart highlights a typical role play of Asset managers in the financial system:

Linking investors Serving the needs

and companies of investors

Investment Asset
Companies Investors savings
Managers

Channeling savings Engaging with

towards investment investee companies

Assets under Management in Europe:

From the EFAMA report of Nov 2020, we can deduce
that assets managed by asset managers in Europe had Snapshot from EFAMA
significantly risen between the period 2012-2017. The report Nov 2020

sharp fall in stock markets at the end of 2018 had led

to a decline in assets under management for the
period.

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 Role of asset managers in impact investing

The idea of investing in improving society while seeking stable returns has grown rapidly among
asset managers in recent years. For forward-thinking asset managers, the growing demand for
impact investing creates a significant opportunity. Asset Managers now aim to manage various
impact strategies that include private equity investments to green and social bonds, which work
towards building healthcare solutions, climate change, and biodiversity. By impact investing,
they enhance long-term returns by allocating capital to take advantage of sustainability-related
opportunities in the large available markets. They influence companies by leveraging their
investor rights through engagement and drive impact.

According to growing research that includes BCG's study on total societal impact in 2017,
"investments that incorporate specific ESG Factors outperform those that do not and avoid
risks that may not have been uncovered otherwise." Nearly 80% of global investors say they
focus more on sustainability now than they did five years before. Though there is growing
pressure on asset managers to pay attention to environmental and social issues, many also
realize that ESG and impact investing can generate strong financial returns. A comprehensive
2015 review by the German investment fund DWS and the University of Hamburg of more than
2,000 studies found that 63% showed a strong correlation between ESG performance and
positive returns, while 10% showed a negative effect.

Impact investing can help funds to stand out in a crowded market. They ensure the
sustainability of portfolios with the generation of maximum returns in the coming decades. The
economic collapse due to coronavirus has provided fresh impetus to impact investing. With
many governments favoring spending on projects that help decarbonize energy supplies, there
is rapid growth in investments to support sustainability goals. With a renewed emphasis on
food security, assets managers are looking for impact investing with scope for socially
responsible returns in the supply chain from farm to table. Bank of America estimated in a
report in April 2020 estimated that Food security investments are a $200bn market opportunity
and will grow to an estimated $300bn by 2025.

For impact investing to be fruitful to its mission, asset managers must think about sustainability
more broadly. The asset managers should look at the long-term success of different impact
industries and regions before investing. Asset managers face significant challenges in meeting
the demand for impact investing. While there is a vast volume of ESG performance data
available, but they are not standardized, complicated, and unreliable. Data issues are even
more relevant for non-public equity asset classes, including private companies and
commodities for which ESG data is generally less available. Asset managers were also
confronting that they do not have the required expertise across the full range of investment
and research activities. They need to recruit talents who understand both financial markets and
sustainability issues. Finally, asset managers face challenges as employees still view ESG
performance as a compliance-oriented exercise and not as a primary lever for value creation.
By investing in new tools to harness ESG data and building the right talent and capabilities,

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asset managers can develop an authentic and credible investment approach and expand impact
investing in all asset classes.
Robeco: The Investment Engineers (statistical information referred from the article in Unpri-
passive investments)
Robeco, international asset management firm, provides a Robeco's Assets information Amount or value
wide variety of active portfolios, from equities to bonds, Assets Under Management 173.5 Bil Eur
and believe in research and adopt a 'pioneering yet ESG-integrated Assets 151.3 Bil Eur
cautious' approach. Their products are active investment Assets Under Engagement 316 Bil Eur
strategies that cover asset classes built around Shareholder meetings voted 5926
sustainable and quantitative investment, credits, Companies engaged 229
emerging markets, developments, and thematic investments. 2019 saw high demand for
sustainability solutions. In order to satisfy this demand, the managers grouped a wide range of
strategies creating a more easily recognizable and precise approach to sustainability across
three areas:
Sustainability Inside (for the year 2019, 134.8 Bil Euros), Sustainability Focus (for the year
2019, 8.2 Bil Euros) and Impact Investing (for the year 2019, 8.3 Bil Euros).
Impact Investing
Robeco's thematic and SDG approach invests in businesses that contribute to positive,
sustainable growth as a part of their Impact Investment offering. Capital via this product range
targets enterprises that do more good than damage on a predefined metric that includes
improving food safety in emerging economies. All impact techniques under Rbobeco are called
RobecoSAM. This product range further improved when one of Japan's most prominent
financial organizations gave a mandate for RobecoSAM to handle an extensive SDG equity
portfolio.
Multi-Factor Equity Index
Sustainable Multi-Factor Index offers complete transparency to the client only, thus avoiding
the well-documented risks of public index arbitrage and overcrowding. they built an index to
satisfy the risk-return objectives through factor exposures that satisfied ESG integration
objectives by using RobecoSAM Smart ESG score to tilt index towards sustainable companies –
aiming for a 20% higher score compared to the parent index.
Plans for 2020
The variety of policy initiatives globally demands that investors consider sustainability issues in
Robeco’s investment approach. Robeco expects increased interest in SI products in emerging
markets by the clients, in turn facilitating the entry of Robeco Sustainable Emerging Stars onto
client's sustainability platforms. Climate change continues to be the priority aspect in investors'
minds. They plan to investigate how strategies can help reduce the carbon footprint of investee
companies, thus assisting clients to reduce their climate change risk. As part of these efforts,
they are developing new data sources to measure and forecast companies that are best
equipped to address transition risk to a low-carbon and climate-resilient future. Launching an
aggregate green bond fund fits this focus, combining investments that incorporate sovereign
and SSA issuers.
SDG Impact Framework
The proprietary SDG Impact Framework assesses whether a company has a net positive or
negative impact on one or more of the SDGs. The framework consists of a three-step sequence

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that starts with an assessment of the products and services, followed by the analysis of the
company's 'contributing to the sustainable development goals,' and ending with a review of
company controversies that could negatively influence its SDG impact. This analysis results in a
proprietary SDG impact score that determines the extent to which companies are suitable for
inclusion in the SDG strategies.
Appendix

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 References
 robeco sustainability report
 unpri passive-investments
 thegiin impact-investing
 HBR report on Sustainable Investing
 Lexology Library
 impactinvestingguide- Asset Management
 .axa-im.com - responsible-investing
 Bain briefing on Private Equity Investors and Impact investing (PDF file)
 www.ft.com
 Efama Asset Management Report